m 


,-,;,' '/ 1      t      /(^      )f      ^      )^     ^ 


THE 


METHODS   AN^D   MAOHII^^ERY 


PRACTICAL  BANKING, 


CLAUDIUS  B.   PATTED, 

Late  Cashier  of  the  State  National  Bank,  of  Boston,  Mass. 


REPRINTED    FROM 


RHODES'  JOURNAL  OF  BANKING 


AND   CAREFULLY  HEVItiED  AND   ARRANGED. 


Second  Edition. 


1891: 

BRA.DFORD  RHODES  &   COMPANY. 

78  William  Street, 

NEW  YORK. 


'A  chield's  amang  you  taking  notes. 
And  faith,  he'll  prent  it." 

—  Burnt. 


CopyrigUi,  1891. 

BRADFORD   RllOIiKS  vt   COMPANY. 

All  rights  reserved. 


IIl^TEODUCTOEY. 


A  VALUABLE  Text-Book  must  be  written  by  one  who  is  a  con- 
scientious student  of  the  subject  treated,  and  who  has  himself 
had  practical  experience  of  the  requirements  of  the  school  where  his 
book  is  to  be  used  as  a  guide.  He  must  also  have  the  faculty  of 
expression,  the  ability  to  make  his  meaning  clear  and  easily  under- 
stood. As  a  rule,  bankers  are  men  of  affairs ;  they  drive  ahead  in  the 
path  of  daily  work  and  worry,  and  let  others  write  books. 

Mr.  Claudius  B.  Patten,  the  author  of  this  volume,  was  a  bom 
~  banker.  He  loved  his  profession  and  sought  continually  to  formulate 
better  and  safer  methods  in  the  transaction  of  the  banking  business. 
He  realized  that  a  good  business  man  is  never  too  old  or  too  smart  to 
learn.  The  judgment  of  the  officer  or  clerk  who  claimed  to  "know  it 
all "  he  regarded  with  a  just  distrust.  The  knowledge  he  had  himself 
acquired  he  was  always  willing  to  impart  to  others.  Selfishness  had 
no  place  in  his  nature,  and  he  was  opposed  to  taking  out  a  patent  on  a 
new  idea  and  putting  it  under  lock  and  key  in  his  own  bank.  It  will 
be  a  hopeful  sign  when  bank  managers  can  look  beyond  the  confines 
of  their  own  counting-rooms  and  cultivate  a  spirit  of  fraternity  and 
helpfulness  toward  others  engaged  in  the  same  business.  A  well- 
managed  bank  to-day  is  a  cog  in  the  great  wheel  of  business  activity; 
\  if  its  management  is  selfish  and  narrow,  without  the  appropriate 
adaptation  to  the  other  cogs  necessary  to  maintain  the  symmetry  of 
the  wheel,  it  causes  a  grating  and  wearing  of  the  spindle,  and  so 
increases  its  own  chances  of  being  removed  for  repairs. 

Born  in  Kingston,  New  Hampshire,  April  7,  1 828,  Mr.  Patten  was 
of  a  higlaly  respected  family.  When  a  young  man  he  went  to  Boston 
and  readily  secured  employment,  at  once  making  himself  noticeably 
useful  to  his  employers.  His  manners  and  habits  were  sueli  that  he 
rapidly  made  friends,  through  whose  influence  he  eventually  secured 
the  position  of  junior  clerk  in  the  Suffolk  Bank.  He  remained  with 
that  institution  for  nearly  twenty  yeai"s.  steadily  rising  to  the  position 
of  Assistant  Cashier.  This  he  held  until  1867,  when  he  resigned  to 
become  Cashier  of  the  State  National  Bank  of  Boston. 

Mr.  Patten  was  enthusiastic  in  regard  to  the  busmess  of  banking 
and  carefully  educated  himself  in  all  its  branches.     He  could  take  up 


.IRQ/HQ^ 


IV.  IKTRODUCTORY. 

the  work  of  a  clerk  on  a  moment's  notice,  aid  liini  to  discover  an 
error  and  took  pleasure  in  showing  him  how  to  shorten  his  work  by 
improved  methods  of  conducting  it,  and  was  constantly  in  touch  with 
every  depai'tment  of  his  own  bank.  Though  kindly  appreciative 
of  the  work  of  clerks  in  subordinate  positions,  he  was  rigid  in  the 
requirement  of  faithful  service. 

It  was  while  he  was  with  the  Suffolk  Bank  he  conceived  the 
idea  and  laid  the  foundation  of  his  book,  which  may  be  fitly  termed 
liis  legacy  to  the  banking  world — his  Methods  and  Machinery  oe 
PRACTiCAii  Banking.  This  work  is  therefore  the  embodiment  of  a 
long-cherished  plan  for  furnishing  practical  mformatlon  to  bankers  and 
to  the  large  number  of  young  men  who,  as  junior  officers  and  clerks,  are 
ambitiously  struggling  to  fit  themselves  for  higher  positions.  The 
author  fully  realized  the  difficulties  lying  in  the  path  to  promotion. 
His  own  experiences,  as  recited  in  these  pages,  will  show  how  his  heart 
went  out  to  those  in  like  situations,  and  how  earnestly  he  desired  to 
benefit  them  by  his  own  example.  Of  him  it  can  truly  be  said,  he 
practised  what  he  preached. 

This  volume  is  the  beneficent  outcome  of  over  twenty  years'  practical 
experience  in  a  banking  institution  ranking  in  financial  history  as 
one  of  the  foundation  stones  of  sound  banking  in  the  United  States, 
supplemented  by  patient  study  of  better  methods  in  later  years. 

Outside  of  his  bank  work  Mr.  Patten  was  a  close  observer  of  affairs. 
In  1884  he  took  a  much  needed  vacation  by  going  abroad.  In 
company  with  his  young  son  he  walked  through  England— the  best 
possible  way  of  seeing  any  country.  He  took  notes  by  the  way.  and 
on  his  return  wrote  "  England  as  Seen  by  an  American  Banker;  Notes 
of  a  Pedestrian  Tour"  —  a  charming  record  of  English  manners  and 
customs.  The  volume  fui'nishes  ample  disproof  of  the  popular  belief 
that  the  only  book  the  banker  knows  anything  about  is  an  account 
book.     The  dedication  is  in  Mr,  Patten's  happy  style ;  here  it  is : 

"To  the  English  People,  in  hall  and  cottage,  in  city  or  country, 
who  so  cheerfully  responded  to  all  my  inquiries;  and  to  MY  twelve- 
YEAR-OLD  SON,  the  companion  of  my  travels,  whose  familiar  presence 
made  all  lands  home  to  me,  this  volume  is  cordially  inscribed. " 

Mr.  Patten  was  a  genial,  whole-souled  man,  one  of  nature's  noble- 
men, whose  unexpected  and  untimely  demise  was  mourned  not  only 
by  his  immediate  friends  and  acquaintances,  but  by  the  entire  banking 
community  in  which  he  had,  for  a  long  time,  played  so  prominent  a 
part.  The  direct  cause  of  his  death  was  over-work.  He  died  at 
Boston,  May  22,  1886.  The  papers  collected  in  the  present  work  began 
in  Rhodes'  Journal  of  Banking  in  August,  1884,  and  were  continued. 


INTRODUCTORY.  •  V. 

with  some  interruption  (owing  to  the  author's  LQness)  until  1887.  Before 
his  last  illness  Mr.  Patten  had  completed  the  Practical  Banking  series. 

It  is  especially  fortunate  that  Mr.  George  B.  Warrex,  Mr.  Patten's 
successor  in  the  State  National  Bank  of  Boston,  has  been  so  kind  as  to 
collate  and  re^ise  the  papers  for  publication  in  book  form.  He  was 
associated  with  the  author  for  over  twenty  years,  was  in  sympathy 
with  his  plans  and  understood  his  wishes  regarding  the  publication 
of  tliis  volume. 

The  portrait  of  the  author  presented  herein  gives  an  imperfect  idea 
of  his  personal  appearance.  The  picture  was  engraved  from  a  small 
photograph  taken  by  an  amateur  in  a  remote  New  Hampshire  village 
wliere  Mr.  Patten  spent  his  summer  vacation  a  few  years  ago.  It  is 
the  only  recent  photograph  of  him  in  existence. 

No  work  performed   by  the  writer  in  a  somewhat  busy  hfe  has 

produced  more  hopeful  anticipation  than  the  preparation  of  this  book 

for  the  press.     It  is  gratefully  inscribed  to  the  memory  of  its  gifted 

author,  with  the  firm  belief  that  it  will  receive  a  cordial  welcome  from 

bank  officers  and  clerks  of  every  grade,  and  from  all  others  interested 

in  banking  progress.  Bradford  Rhodes. 

Office  of  the  Journal  of  Banking,  ( 
January,  1891.  ' 


*COIsrTEE"TS. 


I —THE  BANK  CLERK  AND  HIS  PROFESSION. 

Introductorj' — his  education — promptness — faithfulness — must  be  good  natured — 
have  a  high  standard. 

II.— THE  PAYING-TELLER  AND  HIS  CASH. 

Form  of  his  book — receipting  for  pa.vment  of  cliecli — paying  part  of  check — "good 
when  properly  indorsed  " — count  your  money — checks  presented  after  drawer  is 
dead — money  found  outside  the  counter — inside  and  outside  the  grating — tellers 
as  detectives — about  raised  checks — when  teller  is  short — mutilated  and  counterfeit 
money — branding  worthless  notes. 

III.— THE  RECEIVING-TELLER  AND  THE  DEPOSITORS. 

Form  of  his  book — all  about  pass-books — a  London  bank  pass-book. 

IV.— THE  BOOK-KEEPER'S  DESK, 
flow  to  keep  his  books — how  condition  of  bank  is  shown — handling  cancelled  checks 
— how  to  make  out  report  to  Comptroller — the  Skeleton  Ledger,  with  correctly 
ruled  and  printed  form  (in  appendix). 

v.— THE  COLLECTION  DEPARTMENT  AND  MESSENGER. 

Note  covers — collection  record — notifying  parties — cashier's  notice  in  old  times — 
messenger's  duties — why  drawee  would  not  pay  draft — perishable  property — 
drawee's  place  of  business — ' '  in  exchange  "  and ' '  with  exchange ' ' — paying  money 
back — what  time  in  the  day  is  note  due — paying  by  check — "  tramp  "  collections 
— collection  systems  contrasted. 

VL— THE  BANK'S  NOTARY  AND  PROTESTING. 

Bank's  responsibility  for  notary's  work — how  to  protest — when  draft  is  sent  by  express 
— protesting  joint  note — no  residence  or  business  place — used  to  being  protested. 

VII.— THE  DISCOUNT  CLERK  AND  THE  LOAN. 

Discount  clerk's  responsibilitj' — memorandums  and  tickets — taking  care  of  notes — 
how  to  reckon  interest — ownership  marks — rates  to  depositors — collateral  notes 
with  form^buying  paper — responsibility  of  broker — accommodation  and  business 
paper — "  manufactured  "  paper — other  kinds  of  paper — a  safeguard — when  bank's 
reserve  is  not  up. 

VIII.— THE   BANK'S  COLLATERALS. 

How  to  file  them — responsibility  for  collaterals^sample  of  ancient  form  of  collateral 

note. 

IX.— BONDS  AND  COUPONS. 
Destroyed  bonds — how  to  collect  money  for — stopping  payment  of — handling  coupons 

— a  bad  practice  described. 


"  A  complete  topical  Index  appears  in  the  back  part  of  this  volume. 


Viil.  CONTEXTS. 

X.— THE  CASHIER  AND  HIS  DUTIES. 

His  responsibility — relation  between  president  and  cashier — special  duties — signature 
— bank's  correspondence — cashier's  record — daily  memorandum — agenda  and 
scrap  book — valuable  hints  about  paying  dividends. 

XI.— THE  STOCK— ITS  OWNERSHIP  AND  TRANSFER. 

Stock  certificate  book — how  to  transfer  stock — probate  court  experience — estates  of 
non-residents — how  treasurer  tried  to  transfer  shares — when  person  is  dead — lost 
certificates — when  shareholders'  names  are  changed. 

XII.— THE  BANK'S  CIRCULATION. 

Circulation  record— stolen  notes — redeeming  mutilated  bills — about  fragments  of  bills 
— when  bills  are  lost — over-issues — workings  of  redemption  bureau. 

XIII.— THE  MAIL  AND  TELEGRAPH. 

Use  both  judiciously — letter  record — registered  letters — how  to  use  the  wires — certify- 
ing by  telegraph — wiring  money — cipher  telegrams. 

XIV.— EXCHANGE  AND  LETTER  OF  CREDIT. 

What  is  meant  by  exchange  and  how  it  works — what  a  letter  of  credit  is — how  used 
— identification  unnecessary — experience  of  the  author. 

XV.— A  CHAPTER  ON  CHECKS. 

What  a  check  is — how  to  draw  checks — how  to  treat  errors  in— issuing  duplicates — 
guarantee  of — certificates  of  deposit — treasurer's  endorsement — good  and  bad 
forms — stopping  payment  of  checks — cancelling  checks. 

XVI.— NOTES  AND  DRAFTS. 
What  they  are — how  to  write  them — their  important  features. 

XVIL— THE  PRESIDENT  AND  DIRECTORS. 
Duties  and  responsibilities — meetings  of — selecting  directors — some  types  of  bank 
presidents — president's  endorsement. 

XVIII.— SOME  WORDS  ON  MANAGEMENT. 
Business  mens'  moods — strangers — bank  doctor — banking  conveniences — overworking 
officers — the  salary  question — marriage  of    clerks — vacations — banking  hours — 
curious  petition  of  Boston  bank  clerks — lunch  in  bank — bank's  attorney — the  bank 
examiner — defalcations — Sunday  work — not  a  model  bank. 

XIX.— ON  PERSONAL  MATTERS. 

Courtesy  a  necessity — employing  leisure  time — handwriting — signatures — pen  paralysis 
— death  of  officer — officers'  residence — clerks'  investments — bank  secrets — clerks' 
studies. 

XX.— BUSINESS  AND  PLEASURE. 
Rusty  clerks — bankers'  institutes — how  to  spend  vacations. 

XXI.— BONDS  OF  SURETYSHIP. 

Their  moral  value — about  fidelity  companies— taking  the  oath — extended  banks- 
renewal  of  officers'  bonds  not  necessary. 

XXII.— COMMONPLACE  CARES. 
Locating  banking  rooms — internal  arrangement — waste  paper — locks  and  vaults — old 
books  and  papers. 


CONTENTS.  )X. 

XXIII.— THE  CLEARING-HOUSE  SYSTEM. 

Its  workings  clescribeil — loans  between  banks — dishonored  checks — personal  expe- 
rience— how  returns  are  made. 

XXIV.— OUR  ENGLISH  COUSINS. 

Banking  in  England — open  and  crossed  checks — starting  a  bank  in  London — profits 
of  English  banks. 

XXV.— TRUST  COMPANIES. 
Description  and  practical  workings  of. 

XXVI.— THE  SUFFOLK  BANK  SYSTEM. 

What  it  was  and  how  it  worked — personal  reminiscences  of  author. 

XXVII.— EVER  YD  AY  QUESTIONS  AND  OTHER  MATTERS. 

The  charity  question — small  accounts — special  deposits — disclosing  account  of  depos- 
itor— ink  responsibility — a  legal  signature — signing  by  mark — use  of  banking 
terms — women  in  banking — identification — in  times  of  panic — banks  and  clergy- 
men—amusement question — Canadian  banking. 

SUPPLEMENTAL  CHAPTERS. 

*XXVin.— INSIDE  WORKINGS  OF  A  BANK. 

How  to  make  examinations  and  kjioinihej  are  correct — a  quick  method  of  discovering 
crooked  book-keeping — tellers'  differences  and  how  to  remedy  them — journal 
entries  and  charge  tickets — best  method  of  opening  ledgers,  with  ruled  and 
printed  form  showing  how  to  do  it — stopped  checks  and  how  to  handle  them,  etc. 

XXIX.— LAWFUL-MONEY  RESERVE  OF  NATIONAL  BANKS. 

Complete  tables  and  examples  showing  how  reserve  is  computed — funds  available 
for  reserve  under  the  law  now  in  force. 

XXX.— A  CHAPTER  ON  SIGNATURES. 
How  some  bank  officers  write  their  names  (with  fac  similes) — blind  signatures  and 
plain  writing  contrasted — forgery  prevented. 


APPENDIX. 

Form  of  the  "Skeleton  Ledger."    Blank  Report  sent  to  National  banks  by  the 
Comptroller  of  the  Currency. 


*  Note.— Chapter  XXVIII  comprises  a  series  of  articles  written  by  Mr.  James  G. 
Cannon,  Vice-President  of  the  Fourth  National  B;ink,  of  New  York,  and  which  have 
already  been  published  in  Rhodes'  Jourxal  of  Banking.  Mr.  Cannon's  many 
years'  experience  and  thorough  familiarity  with  the  subjects  treated  render  his 
contribution  a  fit  supplement  to  Mr,  Patten's  work. 


PRACTICAL    BAI^KI^G. 


CHAPTEIl   T. 

THE   BANK   CLERK   AND   HIS   PROFESSIOX. 

THERE  are  many  aspects  of  this  matter  of  Banking  as  a  profession 
which  deserve  attention  in  such  a  work  as  this  and  any  proper 
treatment  of  this  topic  must  command  the  consideration  of  all  readers 
who  are  in  the  bankmg  business  or  who  have  thoughts  of  entering  it. 

It  is  often  urged  as  an  argument  against  positions  in  banks  that 
there  are  few  such  tliat  afford  proper  scope  for  the  natural  ambition  of 
a  lively  and  intelhgent  young  man. 

I  doubt  not  that  this  argument  has  been  given  undue  weight  fi'om 
the  very  fact  that  many  rather  unintelligent  and  unhvely  young  men 
have  entered  banks  and,  as  a  matter  of  course,  remained  there  in  a 
very  stagnant  and  unprogressive  way  of  life,  learning  little  or  nothing 
that  was  not  witliin  the  direct  scope  of  their  special  duties,  and,  as  a 
consequence,  never  recei^'ing  promotion  or  advancement.  It  should  be 
remembered  that  force,  ability  and  faithfulness  tell  as  well  in  banking 
as  in  the  average  business  situations  of  the  period,  and  that  traits  and 
conduct  of  the  opposite  character  are  as  fatal  there  as  elsewhere. 

Some  of  the  best  bankers  in  the  United  States  to-day  are  men  who 
have  passed  rapidly  tln-ough  every  minor  office  in  banks.  The  names  of 
many  of  them  would  have  a  familiar  sound  were  they  mentioned  here, 
though  the  younger  generation  of  bankers  are  living  so  far  from  the 
time  when  these  prominent  bank  managers  were  serving  as  Messengers, 
Tellers,  etc. ,  that  any  statement  that  they  were  once  on  the  low  rounds 
of  the  bank  ladder  would  be  news  to  the  young  men. 

Then  we  hear  objections  on  the  score  of  health  but  there  are  no 
good  reasons  for  deeming  the  bank  officer's  position  particularly 
unattractive  on  accoimt  of  its  unhealthfulness.  He  leads,  to  be  sure, 
so  far  as  his  daily  routine  of  work  is  concerned,  rather  a  cramped  and 
confined  mode  of  life,  and  his  position  is  open  to  the  objection  that  it 
involves,  at  times,  hea\Tr  mental  strains.  The  bank  officer  also  labors 
tmder  the  disadvantage  of  being  at  a  sort  of  work  which  is  extremely 
irregular  in  its  character. 

Every  bank  which  is  properly  managed  has  to  carry  along  a  staff 
sufficiently  strong  to  do  its  work  promptly  and  well  in  times  when  its 
work  is  the  largest  and  most  pressing,  for  dealers  cannot  wait.  Each 
day's  work  rtiust  be  done  in  that  day,  and  the  right  kind  of  extra  help 


2  PKACTICAL   BA>'KIXG. 

caruiot  be  summoned  at  a  moment's  warning.  As  a  consequence  there 
are  days  in  active  banks  when  its  officers  are  overworked,  and  days 
when  the  hours  drag  heavily  because  there  is  so  Mttle  to  do. 

This  spasmodic  and  irregular  character  of  bank  Avork  is  a  decided 
objection  to  it.  Yet  all  these  features  which  I  have  described  as 
belonging  to  labor  at  the  desk  or  counter  of  a  banking  institution  are 
apt  to  exist  in  positions  connected  with  general  business.  The  counting- 
house  of  the  merchant  and  the  salesrooms  of  the  dry  goods  jobbers 
and  the  grocers  present  about  the  same  class  of  drawbacks. 

All  sorts  of  business  have  their  shady  and  their  sunny  sides,  and 
one  of  the  relicA'ing  features  of  banking  is  found  in  the  fact  that  its 
workers  have,  as  a  general  thing,  more  time  to  themselves  than  clerks 
and  business  men  in  the  other  occupations  I  have  named. 

And,  if  bank  officers  will  properly  improve  their  out-of-bank  hours, 
there  are  no  reasons  why  they  cannot  get  along  comfortably  enough 
with  the  share  of  confinement  Avhich  is  their  daily  lot.  It  should  be 
evident  enough  to  them  that  they  should,  when  away  from  the  bank, 
shun  as  far  as  practicable  a  continuance  of  sedentary  life.  They 
should  seek  out-of-door  work  and  recreations,  should  avoid  late  hours 
in  confined  halls  and  rooms,  should  not  over-read  or  over-study, 
should  cultivate  pleasant  society,  and  should  have  innocent  hobbies 
which  divert  the  mind  from  business  care  and  thoughts. 

If  such  methods  of  using  the  time  outside  the  bank  can  be  mam- 
tained  they  will  effectually  dispose  of  any  objection  to  banking  as 
unliealthful. 

Again,  men  often  say  they  do  not  like  corporation  service  of  any 
sort,  since  in  it  there  is  little  opportunity  for  "  indiA^idual  independence 
in  conduct  or  self-reliant  assertion. "  They  claim  that,  in  positions  of 
this  character,  a  certain  routine  of  movement  is  marked  out  for 
employees,  of  all  grades,  and  that  there  are  few  opportunities,  and 
little  encouragement,  for  independent,  discretionary  action.  There  is 
in  all  this,  it  is  said,  a  narrowing  and  belittling  of  true  manliness  and 
vigor  of  character,  which  tendency  constitutes  tlie  real  shady  side  of 
the  business. 

Wliile  I  have  quoted  this  objection  as  applying  to  all  corporation 
■employment  we  are  only  interested  in  its  bearing  on  clerks  in  banking 
institutions. 

We  must  admit  that  in  all  well-regulated  banks  where  many  officers 
•of  various  grades  are  employed  there  must  prevail  an  orderly  discipline 
and  subordination. 

As  in  military  service  there  are  Generals,  Colonels  and  Lieutenant- 
Colonels,  here  there  are  Presidents,  Cashiers  and  junior  officers — Tellers, 
Book-keepers  and  Clerks  of  different  departments.  The  President,  if 
he  is  a  working  President  and  the  responsible  head  of  the  bank,  must 
be  served  as  such  by  all  officers  under  him — nmst  receive  from  them 
unquestioning  service  where  no  sacrifice  of  principle  is  concerned.    The 


THE    BAXK    CLKKK    AXI)    HLS    PKOFESSIOX.  3 

Cashier,  who  is  the  executive  officer  of  the  bank,  must  receive  similar 
service  from  those  under  him. 

Outside  and  beyond  all  this  way  of  bank  life  lies  what  may  be 
termed  a  lilgher  individual  life  and  character. 

In  one  sense  all  the  officers  of  whom  I  have  spoken  are  subordinate. 
The  President  is,  in  a  measure,  subordinate  to  the  Directors,  who  are 
in  turn  subordinate  to  the  shareholders.  The  Cashier  is  subordinate  to 
the  President ;  the  under  officers  subordinate  to  the  Cashier.  Yet,  in 
the  highest  sense,  none  of  these  are  the  servants  of  anybody.  It  is 
perfectly  possible  for  each  and  all  to  render  unto  Cfesar  all  that  is  due 
to  CiPsar  without  sacrificing  one  iota  of  self-respect  or  surrendering  any 
single  feature  of  true  manliness  of  character. 

And  so  to  live  and  move  should  be  tlie  determination — the  resolution 
—  of  every  bank  subordinate. 

I  may  appropriately  say  here  that  it  should  be  the  constant  endeavor 
of  those  officers  of  a  bank  who  hold  what  are  termed  superior  positions 
to  cultivate  and  develop,  as  far  as  possible,  the  self-respect  of  their 
subordinates.  A  person  may  for  a  lifetime  occupy  a  jxuiior  position 
upon  the  staff  of  a  bank.  Promotion  does  not  come  to  all — under 
some  circumstances  cannot,  however  deser\'ing  of  advancement  the 
subordinate  may  be — yet,  in  the  minor  position,  faithful  service  and 
manly  character  are  entitled  to  Just  as  much  honor  and  to  as  full 
recognition  as  that  rendered  by  those  in  more  conspicuous  places.  I 
have  had  a  long  and  broad  experience  in  banking,  and  my  observation 
has  convinced  me  that  there  are  instances  almost  without  number 
where  bank  officers  of  merit  and  abilities  fitting  them  for  the  highest 
positions  in  their  profession  have,  through  unpropitious  circiunstances, 
never  gravitated  out  of  very  inconspicuous  offices,  while,  on  the  other 
hand,  many  men  scantUy  equipped  for  high  place  have  been  lifted,  as 
it  were,  by  unusually  favorable  circumstances  into  it.  But  the  man 
makes  the  place,  not  the  place  the  man.  And  among  those  who  are  so 
situated  as  to  be  able  to  take  an  inside  view  of  these  men  and  these 
places  in  banks  of  Avhich  I  am  writing,  estimates  of  the  real  worth  and 
standing  of  men  are  made  up  from  what  the  men  themselves  really 
count  for,  not  from  the  positions  they  happen  to  hold. 

There  are  few  experienced  bankers  who  cannot  recall  instances 
where  they  have  observed  men  who  have  for  generations  faithfully 
served  in  such  subordinate  positions  as  junior  clerks,  bank  messengers, 
etc. ,  who  have  really  carried  themselves  better  and  showed  more  good 
judgment  and  ability  than  many  others  who  have  had,  from  high 
position,  the  nominal  ordering  of  the  goings  and  comings  of  these 
subordinates. 

It  will  thus  be  seen  that  I  find  no  reasons  for  discouraging  the  right 
sort  of  young  men  from  entering  banks.  And  many  a  bank  manager 
will  be  ready  to  confirm  the  opinion  that  I  here  express,  that  there 
does  not  seem  to  be  m  these  days  in  either  city  or  country,  an  over- 


4  PRACTICAL  BANKING. 

supply  of  the  right  sort  of  young  candidates  for  situations  in  banking 
institiitions. 

And  now  let  us  see  what  general  qualities  the  bank  expects  to  find 
in  those  who  desire  to  come  into  its  employ  and  who  look  for  advance- 
ment as  their  ser\'ice  continues.  In  selecting  a  young  man  for  a  vacant 
position  the  bank  will  certainly  take  the  best  one  obtainable.  The 
best  will  be  none  too  good  for  the  work.  In  the  matter  of  integrity 
Uttle  need  be  said,  for  everytliing  is  understood. 

In  buying  a  piece  of  paper  or  in  selecting  a  bank  clerk  the  bank 
Manager  does  not  ask  whether  or  not  the  parties  are  superintendents 
of  Sunday  schools,  deacons  of  churches,  or  what  may  be  their  theo- 
logical views — whether  they  belong  to  the  primitive  Methodists  or 
hberal  Unitarians.     He  wishes  to  know  whether  the  men  are  honest. 

Honesty  is  a  mental  trait.  It  runs  in  families.  There  are  many 
young  men  who  may  do  very  well  in  life,  if  they  are  kept  out  of 
positions  of  trust,  but  who  should  never  be  given  places  in  banks. 
Heredity  is  against  them. 

The  man  who  has  once  defaulted,  in  any  shape  or  manner,  should 
never  again  be  placed  in  charge  of  other  people's  money — especially 
the  money  belonging  to  widows  and  orphans.  Help  him  up  in  any 
way  possible,  but  deem  it  impossible  for  him  to  serve  in  a  bank. 

But  in  addition  to  integrity  and  general  ability  the  bank  will  look 
also  for  a  natural  adaptiveness  for  this  occupation. 

No  young  man  ought  to  think  of  entering  upon  banking  as  a 
profession  who  has  not  a  real  taste  for  the  business,  and  capacity 
adapted  to  the  work  upon  which  he  is  entering.  He  should  have  a 
good  head  for  figures,  a  good  hand  for  general  clerical  work,  and  a 
taste  for  financial  matters.  A  person  can  somehow  get  along  in  the 
business  of  clerking  in  a  bank — in  some  banks — without  having  many 
of  the  qualifications  I  have  named ;  but  he  cannot,  under  such  circum- 
stances, be  otherwise  than  a  failure  as  a  bank  ofiicer.  He  fails  of 
promotion,  is  a  burden  to  other  and  better  clerks,  and  there  is  a 
constant  f  eehng  that  he  ought  to  have  chosen  some  other  trade. 

There  is  a  practice,  becoming  more  and  more  in  vogue  among  our 
best  banks,  of  taking  in  boys  of  from  sixteen  to  eighteen  or  there- 
abouts, to  learn  the  banking  business — to  become  efiicient  and  skilful 
aids  in  the  profession  by  beginning  on  the  lowest  round  of  the  ladder, 
at  a  boy's  salary,  and  working  along  up  by  faitliful  and  effective 
service.  This  method  of  supplying  the  staff  of  a  bank  vnth  valuable 
oflScers  is  a  good  thing  for  the  boys  and  a  good  thing  for  the  banks.  It 
is  a  practice  which  has  for  many  years  been  followed  in  the  English 
banks,  particularly  in  the  Bank  of  England,  but  one  that  has  not  long 
prevailed  in  this  country. 

The  general  custom  here  in  the  past  was  to  make  up  the  corps  of 
officers  of  matured  material,  selected  from  other  branches  of  business, 
and  youths  who  were  entering  aU  other  branches  of  business  as  learners, 


THE    BAXK    CLERK    A]N"D    HIS    PROFESSION.  5 

on  small  salaries,  were  seldom  given  an  opportunity  to  obtain  appren- 
tices' positions  in  banks. 

In  the  Bank  of  England,  youths  of  from  sixteen  to  eighteen  years 
of  age,  many  of  whom  are  the  sons  of  clergymen,  officers  in  the  army, 
and  of  what  the  Londoners  term  "tradesmen  of  the  better  class,"  are 
received  mto  the  institution  as  assistants  in  the  various  depai'tments, 
and  as  out-Tellers  or  Messengers,  at  a  salary  of  £80  and  Christmas 
money — a  salary  certahaly  equal  to  the  average  paid  to  junior  clerks 
here.  In  London  private  banks  these  juniors  commonly  start  with  £60 
a  year. 

I  found  the  Scotch  banks  had  a  custom  of  receiving  young  men  into 
their  service  on  a  stated  system  of  three  years'  apprenticeship,  under 
regular  indentures  and  on  a  very  small  salary. 

I  have  in  my  own  practical  banking  done  what  I  could  by  example 
and  influence  to  promote  this  system  of  receiving  boys  just  out  of  the 
higher  schools  into  minor  places  in  banks,  and  have  never  regretted  my 
efforts  in  that  direction. 

The  best  position  for  a  youth  in  a  bank  is  that  of  general  assistant. 
In  such  a  place  he  can,  if  alert  and  competent,  quickly  learn  a  deal 
about  the  methods  and  machinery  of  all  the  departments  which  are 
moving  on  about  Mm;  in  these  departments  there  will  be  constant 
chances  for  him  to  acquire  practical  knowledge  of  banking  by  practical 
work.  As  he  works  along,  helping  here  and  there,  as  exigencies  demand, 
he  is  likely  to  develop  an  aptitude  for  some  particular  phase  of  the 
work,  and  in  due  time  the  bank  gladly  promotes  him  into  the  position 
or  department  for  which  he  has  shown  himself  best  fitted.  Every 
junior  officer  of  a  bank  may,  to  some  extent,  have  the  advantage  which 
we  have  mentioned  as  attachmg  to  the  position  of  general  assistant  if 
he  keeps  on  the  alert  and  endeavors  to  make  himself  acquainted  with 
the  general  run  of  affairs  in  his  institution,  and  in  a  proper  mamier  and 
spirit  learns,  as  soon  as  possible,  the  ways  and  methods  of  doing  the 
work  in  each  of  the  departments  wliich  are  being  carried  along  about 
liiin.  There  are  many  reasons  why  this  course  is  to  be  recommended. 
It  will,  in  the  end,  prove  of  great  advantage  to  the  officer  himself ;  for, 
by  acquh-ing  this  knowledge  of  duties  which  are  outside  of  his  own 
department,  he  will  be  fitting  himself  for  filling  other  and  more  impor- 
tant positions  in  his  own  bank,  and  also  be  preparing  himself  for  the 
work  of  rtuining  a  bank  where  many  departments  are  consohdated  in 
one,  if  he  should  happen  to  be  called  into  such  a  position. 

It  has  always  been  deemed,  in  some  points,  rather  disadvantageous 
for  a  young  man  to  enter  upon  banking  life  in  a  very  large  bank,  since 
in  such  an  institution,  where  many  departments  are  run  by  many 
separate  clerks,  he  is  in  danger  of  becoming  but  a  spoke  in  a  wheel, 
which  is  of  little  importance  or  value — unless  suiTounded  and  supported 
by  others — which  cannot  go  alone  or  stand  alone.  But  well-informed 
and  alert  officers  of  the  class  I  have  named,  who  study  into  everytliing 


6  PRACTICAL   BANKIN^G. 

in  the  bank  about  them,  are  of  great  value  to  the  bank  which  employs 
them.     Customers — depositors — appreciate  such  officers. 

Bank  dealers  dislike  very  much  to  be  sent  wandering  around  from 
one  department  to  another  when  they  call  to  make  an  enquiry  at  their 
bank.  If  they  happen,  in  their  unacquaintance  with  details  of  banking 
business,  to  strike  at  first  the  wrong  officer,  it  is  often  very  agreeable 
to  them  to  have  their  matters  looked  into  and  explained  by  this  first 
man,  instead  of  being  told  by  him  that  the  business  does  not  belong  to 
his  department,  and  that  they  must  go  to  some  other  desk. 

EDUCATION    OF   BANK    OFFICERS. 

The  action  of  the  American  Bankers'  Association  establishing  an 
order  of  auxiliary  membership  of  that  Association,  based  upon  terms 
of  service  and  an  acquirement  of  a  thorough  knowledge  of  practical 
banking,  is  deserving  of  the  highest  commendation,  and  it  is  to  be 
earnestly  hoped  that  the  scheme  may  receive  thorough  support.  There 
never  was  a  time  when  a  closer  acquaintance  with  the  practices  and 
principles  of  banking  upon  the  part  of  those  engaged  in  it  was  more 
needed  than  at  present,  and  to-day  the  opportunities  are  excellent  for 
young  men  in  banks  or  on  the  way  to  positions  in  banks  to  acquire  a 
full  knowledge  of  the  profession  of  their  choice.  The  press  is  constantly 
supplying  the  financial  and  banking  student  \nth  aids  to  study.  Many 
of  our  banks  have  quite  extensive  collections  of  reference  books  and 
authorities  and  periodicals  and  miscellaneous  literature  bearing  upon 
the  subject  of  practical  and  theoretical  banking  and  finance ;  and  banks 
which  have  not  been  in  the  habit  of  counting  a  bank  library  as  a 
necessary  part  of  the  "furniture"  of  a  banking  institution  are  now 
beginning  to  buy,  for  the  use  of  their  employees,  the  best  current  works 
on  banking,  and  to  subscribe  for  reUable  banking  journals. 

It  ought  to  be  said  here  that  the  American  Bankers'  Association  has 
simply  taken  the  initiative  step  in  the  subject  of  practical  education  in 
banking  of  the  young  men  in  it,  which,  if  carried  forward  earnestly, 
will  surely  produce  sound  results.  By  way  of  co-operation  with  the 
present  move  of  the  Association  for  the  setting  up  of  civil  service 
examinations  and  certificates  of  progress  made,  local  organizations  of 
bankers'  clerks  for  the  study  of  banking  should  be  organized  in  all  our 
large  towns  and  cities.  And  these  local  institutions  should  have  regular 
meetings  for  discussion  of  bank  practice,  set  up  for  themselves  libraries 
of  banking  books,  and  subscribe  for  such  banking  periodicals  as  will 
aid  them  in  their  studies. 

AN  UNWAVERING  PROMPTNESS. 
An  unwavering  promptness  in  the  discharge  of  all  his  bank  duties 
is  what  every  competent  bank  Manager  demands,  and  has  a  right  to 
expect,  of  every  man  on  his  staff  of  officers.  Time  is,  in  banking,  of 
pre-eminent  value.  It  is  more  than  money.  Anything  in  the  methods 
and  machinery  of  banking — whether  it  is  in  the  officers  themselves  or 


THE    BANK   CLERK    AND    HIS    PROFESSION.  '! 

in  their  modes  of  doin^  work — that  tends  to  a  waste  of  time  is  a  steady 
cause  of  annoyance,  worry  and  disarrangement.  And  a  chronic  tendency 
in  an  officer  towards  dilatoriness  and  slackness,  no  matter  Avhat  may  be 
the  natural  abilities  of  such  an  officer,  is  one  of  the  most  exasperating 
of  things  to  an  able  and  prompt  Manager.  I  know  of  no  single  feature 
in  the  character  of  an  honest  bank  officer  which  is  likely  in  the  end  to 
be  more  fatal  to  his  prospects  of  advancement,  and  more  sure  to 
undermine  his  good  standing  with  both  customers  and  Directors,  than 
this  tendency  I  have  named. 
^'  The  bank  officer,  Avhether  he  is  Cashier  or  Messenger,  or  on  any  of 

the  rungs  between  these  two  positions,  should  systematically  cultivate 
■^  a  habit  of  unswer\'ing  promptness  in  the  discharge  of  every  class  of 
^  work  that  stands  before  him  in  his  daily  routine  at  the  bank.  If  there 
is  work  to  be  done,  let  the  work  be  done  first,  and  the  newspapers  read 
afterwards.  The  usual  hours  of  ]jank  work  in  this  country  are  not 
•  Jburdensomely  long.  And  these  hours  should  be  strictly  given  to  the 
.•^  work  of  the  bank.  Private  eiTands,  private  business  of  all  sorts,  should  /'(/ 
(O  never  be  allowed  to  interfere  in  the  smallest  way  with  these  morning  { 
\^  bank-  hours  and  their  special  duties. 

I  have  never  believed  in  the  setting  up  in  banks  of  too  many  iron 
rules  regarding  the  regulation  of  the  matters  to  which  I  am  here 
referring.  Bank  officers  of  intelligence,  strong  common  sense,  and  of 
a  conscientious  type  of  character,  will  make  these  rules  for  themselves, 
and  live  up  to  them.  Bank  officers  of  different  make-up  are  out  of 
place  in  a  bank ;  and,  in  well-managed  banks,  are  apt  to  make  an  early 
discovery  of  that  fact. 

Bank  hours,  in  this  coxuitry,  are  generally  from  9  to  2  or  3  o'clock. 

Nine  is  not  a  severely  early  hour.     The  clerks  should  be  on  hand  at 

I        that  time.     And  they  should  leave  the  bank  as  soon  after  the  regular 

closing  hours  as  they  can  without  lea\-ing  any  work  beliind  them  that 

demands  immediate  attention. 

The  after-work  hours,  if  properly  used,  may  be  of  great  value  in 
many  points,  as  I  have  elsewhere  shown,  and  the  more  of  them  they 
can  consistently  get  the  better. 

I  was  struck  by  the  sagacity  of  a  remark  made  not  long  since  by  a 
distinguished  banker,  who  was  a  great  worker,  that  nothing  gave  him 
more  satisfaction  than  to  see  his  officers  put  their  work  tlu-ough  promptly 
and  get  away  early. 

Here  are  some  of  the  ways  in  which,  in  a  most  significant  manner, 
bank  officers  shoAv  a  remissness,  where  those  officers  are  of  the  type 
which,  to  use  seamens'  language,  may  be  termed  the  slow-going-about 
class  : 

They  are  apt  to  fail  in  coming  home  promptly  after  the  time  allotted 
to  them  for  vacations  has  elapsed,  allowing  the  most  trifling  causes  to 
interfere  with  their  return  at  maturity.  Little  illnesses,  and  sometimes 
what  are  really  only  imaginary  indispositions,  are  apt  to  dispose  them 


8  PRACTICAL    BAXKIXG. 

to  remain  away  from  the  bank.  And,  for  trifling  reasons,  they  are  apt 
to  ask  for  occasional  absences  for  a  day  or  so — absences  for  the  purpose 
of  attending  to  matters  wliich  the  alert  and  prompt  bank  clerk  would 
Bot  deem  important  enough  to  call  him  away. 

And,  as  I  have  before  said,  the  bank  officer  who  is  chronically 
deficient  in  general  promptness  may  be  depended  upon  to  disappoint 
the  Manager  by  not  being  regularly  on  hand  at  the  right  hour  in  the 
morning.  To  remedy  this  trouble,  the  Bank  of  England  has  an  arrange- 
ment which  might  perhaps  be  introduced  with  good  results  in  some 
banking  quarters  this  side  of  the  water.  It  has  what  is  termed  "The 
Attendance  Book."  This  book  lies  open,  every  morning,  upon  a  desk 
which  every  officer  of  the  old  bank  must  pass  as  he  comes  each  day  to 
his  work;  and,  as  he  marches  past  it,  he  Avrites  liis  name  in  it.  At  9 
o'clock  a  black  line  is  drawn  across  the  page  below  the  signatures  of 
the  prompt  men,  who  have  already  passed  in,  and  all  who  come  along 
late  must  put  their  slow  signatures  under  this  black  mark  of  reproof. 

If  an  officer  is  three  times  late  in  the  Bank  of  England,  he  is 
summoned  before  its  Directors  and  reprimanded.  If  again,  after  this 
formal  reprimand,  he  fails  in  promptness,  and  can  furnish  no  reasonable 
excuses,  he  is  invited  to  resign. 

Such  rules  as  this  are,  of  course,  more  likely  to  be  needed  in  an 
institution  ha%'ing  a  vast  number  of  employees,  like  the  Bank  of  England, 
than  they  are  in  banks  of  more  moderate  size.  And  they  ai*e  also  more 
in  harmony  with  the  general  style  of  administering  affairs  on  the  other 
side  of  the  water  than  they  w^ould  be  with  ways  here. 

I  found  the  head  clerks  and  accountants  of  the  old  Bank  of  England, 
m  a  late  visit  made  there,  A'ery  courteous  and  prompt,  and  they 
impressed  me  as  being  able  and  skillful  men ;  but  the  general  rank  and 
file  there  have  the  reputation  of  being  macliine-like  men,  who  are 
behind  the  times  in  their  ways  and  methods. 

In  the  matter  of  promptness,  as  in  many  other  matters,  the  force  of 
example  is  a  great  power  in  a  bank.  If  the  higher  officers  of  a  bank 
are  slow,  dilatory,  and  generally  slack  in  their  administration,  the  lower 
do-wTi  men  on  the  staff  are,  of  coui'se,  quite  liable  to  be  somewhat 
demoralized. 

The  bank  which  is  so  unfortunate  as  not  to  have,  as  its  chief 
executive — as  its  Cashier — an  alert  and  prompt  man,  is,  in  time,  quite 
liable  to  find  its  entire  staff  falling  into  habits  of  remissness  and 
sluggisliness. 

The  setting  up  of  the  Clearing-House  system  in  our  cities  has  had, 
I  think,  the  effect  to  make  the  bank  officers  of  those  places  perhaps  a 
little  more  systematic  in  the  matter  of  morning  promptness  of  attend- 
ance tlian  they  might  otherwise  have  been.  Many  of  our  city  banks 
nominally  open  at  10  o'clock  in  "winter  and  9  o'clock  in  summer;  but, 
in  cities  where  the  morning  clearing  is  10  o'clock  sharp,  there  is  a  pretty 
complete  abrogation  of  the  10  o'clock  opening.     Winter 'and  summer, 


THE    BANK    CLERK    AXD    HIS    PROFESSIOX.  9 

where  clearing  is  10  o'clock,  officers  of  active  banks — head  officers  not 
excepted — are  generally  found  on  hand  at  9. 

An  illustration  of  individual  influence  in  the  matter  of  promptness 
is  shoAvn  in  the  following  little  incident  : 

The  minister  said  he  had  become  tired  of  starting  his  Sunday 
ser^'ices  at  a  quarter  of  eleven  o'clock,  when  they  were  announced  to 
begin  at  ha-lf-past  ^en  o'clock — ^tired  of  seeing  his  congregation  come 
late.  He  therefore  announced  that  he  was  determined  on  a  reform  in 
this  matter,  and  would,  on  the  next  Sabbath,  and  on  all  coming 
Sabbaths,  commence  services  at  half-past  ten  o'clock  if  there  was  not 
a  person  in  the  house.  I  liked  his  idea,  and  so  presented  myself  at  his 
meeting  the  next  Sunday  at  half-past  ten  o'clock.  Two  or  tliree  of  us 
were  there ;  but  the  minister  was  five  minutes  behind  time  then,  and 
the  same  on  the  succeeding  Sunday.  Promptness  at  once  died  out 
there,  for  it  was  not  practised  by  the  head  man. 

"Wlien  bank  officers  are  unexpectedly  detained  at  home  for  sufficient 
reasons,  they  should  always  send  prompt  word  of  the  detention  to  the 
bank,  so  that  their  work  may  be  at  once  taken  in  hand,  and  there  be 
no  waiting  and  enquiry  for  them.  If  on  the  home-stretch  from  a 
vacation  they  meet  Avith  blocks  in  their  way,  and  are  detained  over 
time,  they  should  use  special  pains  to  get  word  of  their  lock-out  to  the 
bank.  Proper  care  about  these  little  points,  which  one  would  think 
there  was  little  need  of  urging  upon  intelUgent  bank  officers,  is  really 
sometimes  neglected  by  them ;  and  neglect  in  these  matters  is  often  a 
cause  of  no  little  inconvenience  to  the  bank. 

FAITHFULNESS   IN   WORK. 

There  are  bank  officers  who  would  never  dream  of  directly  defrauding 
the  bank  for  which  they  labor  and  who  are  scrupulously  honest  in  all 
then*  monetary  connections  with  their  institutions,  but  who  are  never- 
theless wanting  in  the  spirit  of  integrity  in  the  discharge  of  the  routine 
duties  of  their  positions.  They  go  through  their  duties  in  a  somewhat 
mechanical  manner,  taking  little  real  interest  in  the  welfare  of  their 
bank,  and  shghting  and  shirking  their  work  whenever  opportunity 
offers.  Such  are  simple  eye  servants,  whose  only  object  seems  to  be  to 
do  as  little  as  possible,  and  to  manage  to  get  through  the  labors  of  their 
department  in  such  a  manner  as  to  enable  them  to  keep  their  position 
and  a  respectable  reputation  and  draw  their  salary.  There  is  a  word 
in  very  common  use  among  English  mechanics  applied  to  work  that 
has  been  shabbily  done.  It  is  said  in  such  cases  that  the  job  has  been 
"scamped."  There  is  "scamping"  in  bank  work.  The  workers  of  the 
scamping  class  are  sure  to  be  careless  in  the  use  of  the  property  of  the 
bank.  They  waste  the  stationery  and  other  properties  of  the  institution 
that  are  used  in  their  departments.  They  waste  time,  which  is  the 
property  of  the  bank,  by  insufficient  attention  to  the  duties  of  their 
position,  and  are  apt  to  be  out  of  the  bank  and  on  private  errands 
during  its  regular  business  hours.     The  worst  and    most   unmanly 


10  PRACTICAL    BAXKIXG. 

feature  of  all  this  misdoing  is  that  it  is  done  in  a  laidden  manner.     As 

we  have  said,  the  class  of  which  we  write  make  a  study  to  be  proficient 

in  the  art  of  eve  ser\'ice. 

GOOD    NATURE. 

The  bank  officer  while  at  his  post  of  duty  is,  of  course,  expected  to 
maintain  the  most  imperturbable  good  nature.  The  dealing  public, 
which  is  brought  in  contact  with  him,  whatever  may  be  its  OAvn 
shortcomings  in  the  matter  of  grace  and  temper,  does  not  expect  to 
tolerate  the  slightest  departure  from  perfect  equanimity  on  the  part  of 
their  servants  the  bank  officials.  The  first  lessons  to  be  learned  by 
the  bank  officers  are  to  bear  and  forbear,  to  be  very  patient,  and  to  be 
perfectly  uni*esenting. 

I  have  been  speaking  of  the  temper  and  carriage  of  the  banker  at 
his  business.  But  he  has  another  life  that  should  be  brought  into 
view,  and  over  which  the  requirements  we  have  just  described  might 
also  extend.  The  mind-wearing  and  nerve-wearying  routine  of  labor 
through  which  he  daily  passes  is  apt  to  leave  him  in  an  irritable  and 
nervous  condition — a  condition  tending  to  disqualify  him  for  the  proper 
discharge  of  his  social  and  domestic  duties.  But  he  makes  a  great 
mistake  in  self-management  if  he  gives  way  to  these  dangerous 
influences  of  his  harrassing  occupation  and  allows  himself  to  sink  into 
a  condition  of  chronic  instability,  or  that  of  morbid  aversion  to  social 
pleasures  or  the  natural  stirs  and  excitements  of  domestic  life. 

It  is  well  for  the  bank  officer  to  have  a  family  about  him.  The 
cares  of  providing  for  and  generally  looking  after  all  the  material, 
social  and  educational  wants  of  a  household  should  be  Adewed  by  him 
as  a  blessing  in  disguise.  The  presence  of  the  head  of  the  family 
should  be  like  sunshine  in  the  house,  and  he  should  there  voluntarily 
school  himself  to  the  exercise  of  that  patience,  good  nature  and 
forbearance  which  is,  as  one  might  say,  forced  upon  him  when  m  the 
outside  world  and  at  his  place  in  the  bank.  The  children  who  cluster 
about  him  should  be  looked  upon  as  customers,  who  deserve  the  most 
tender  and  pex'sistent  attention.  They  are  hostages  Avhich  he  has 
given  to  fortune,  and  their  presence  may  be  made  to  serve  as  a  guard 
and  inspiration  to  his  Avhole  course  of  business  life. 

The  man  who  can  look  upon  the  innocent  faces  of  his  little  ones, 
who  are  clinging  about  him  and  believe  in  him,  and  who  are  proud  of 
him,  and  then  go  out  into  the  world  and  deliberately  violate  a  trust, 
and  thus  bring  lasting  disgrace  upon  those  whom  it  Avas  his  duty  to 
honor  and  protect,  nmst  be  lost  to  all  true  sense  of  manhood. 

FINALLY. 

I  think  it  follows  that  a  person  can  be  a  bank  officer  and  be  a  good 
deal  of  a  man ;  a  person  can  also  be  a  bank  officer  and  amount  to  very 
little — either  in  the  bank  or  out  of  it. 

I  doubt  not  that  it  will  bo  urged  that  I  have,  to  use  an  agreeable 
piece  of  slang,  drawn  a  very  large  order  in  this  discussion  of  the  quali- 


THE    BAXK    CLERK    AND    HIS    PROFESSION.  11 

fications  of  a  bank  officer.    But  it  is  better  to  do  thu.s,  and  then  try  the 
best  we  can  to  fill  it — to  reiise  the  standard  high,  and  try  to  reach  it. 

And  I  must  add  that  the  majority  of  the  bank  officers  I  have  known 
come  well  up  to  tlie  standard  I  have  presented.  Of  many  a  President, 
Casliier,  etc.,  wliom  I  have  observed  and  knoA\Ti  miglit  well  be  said,  in 
the  quaint,  but  expressive  words  which  I  have  seen  quoted  as  used  by 
a  Continental  man  trying  to  speak  EngUsh  :  ' '  Never  was  better  man  in 
the  right  place  as  tliis  man  was," 


12  PRACTICAL,    BAXKIXG. 


CHAPTER    II. 

THE  PAYING-TELLER   AKD   HIS   CASH. 

• 

One  of  the  most  important  offices  in  a  bank  is  that  of  Paying- 
Teller.  The  Paying-Teller's  duties  are  clearly  indicated  by  his  title. 
He  is  the  disbm*sing  officer  of  his  institution — he  pays  out  all  its  moneys. 
He  keeps  in  hand  the  cash  of  the  bank  and  meets  all  cash  demands 
upon  it.  In  a  proper  sense,  he  is  the  Cashier  of  the  bank.  Many 
outsiders  so  term  him;  and,  though  entitled  Teller  in  tills  country,  he 
is  in  London  termed  the  Paying-Cashier,  while  the  Recei^dng-Teller  is 
there  denominated  the  Receiving-Cashier. 

The  position  of  Paying-Teller  requires  a  man  of  good  abilities ;  and 
the  men  who  are  to-day  holding  that  position,  particularly  in  our  large 
banks  in  our  Clearing-House  cities,  are,  as  a  class,  strong,  skillful  and 
irreproachable  men. 

I  can  see  how  some  positions  in  a  bank  can  be  "filled  "  by  men  of 
only  moderate  skill  in  ciphering,  counting  and  wTiting  ;  I  cannot 
Imagine  how  any  man  who  is  not  well-nigh  an  expert  in  all  these 
things,  and  also  of  excellent  judgment,  and  good  address,  patience  and 
unwavering  good  nature,  can  make  a  successful  Paying-Teller  in  a 
great  city  bank. 

This  official  generally  cUmbs  into  his  honorable  position  up  the 
ladder  of  ci^^l  ser^^ce,  and  there  is  no  other  path  to  the  place,  as  to  do 
the  work  of  a  Paying-Teller  requu-es  long  apprenticesliip  in  bankmg. 

In  the  cities  these  officials  are  generally  paid  salaries  next  highest 
to  that  of  Cashier ;  and  the  salary  in  this  instance  is  a  correct  indication 
of  the  rank  in  the  promotion  line. 

His  bonds  are  in  amount  only  second  to  those  of  the  Cashier;  and 
in  the  handhng  of  the  cash  of  his  bank  he  is  held  responsible  for  its 
correctness.  But,  though  nominally  held  responsible  for  every  dollar, 
and  for  every  error  he  may  make,  this  full  responsibility  is  not  in  all 
cases  and  under  all  circumstances  fully  enforced. 

This  point  of  bank  officers'  responsibilities,  and  also  the  general 
subject  of  bond  giving  and  bond  enforcing,  I  fully  discuss  elsewhere. 

Here  I  give  the  form  of  the  Paying-Teller's  only  book — a  form  which 
is  an  excellent  specimen,  Avith  the  breath  of  life  in  it,  for  it  is  an  actual 
exliibit  of  an  actual  day's* work  of  a  good-sized  and  well-managed  bank. 
See  Form  1  on  opposite  page. 

Every  Paying-Teller  is  continually  haAnng  brought  before  him  from 
the  nature  of  his  work  questions  which  require  for  their  right  decision. 


THE   PA YIXG  -  TELLER    AXD    HIS    CASH. 


14  PRACTICAL    BAXKIXG. 

good  judgmeut,  backed  by  experience.     Let  us  look  at  some  of  the 
problems  likely  to  come  before  a  Paying-Teller  at  any  moment. 
RECEIPTING   FOR   THE    PAYMENT    OF    CHECKS. 

The  gentleman  presented  to  the  bank  for  payment  a  good  check 
upon  it  for  $1,050.  The  check  had  been  drawn  payable  to  the  order  of 
a  party  who  had  duly  indorsed  it  in  blank  and  passed  it  over  to  the 
present  identified  holder  who  Avas  endeavoring  to  collect  it.  The 
Paying-Teller  asked  this  holder  to  put  his  name  upon  the  back  of  the 
check.  This  he  refused  to  do,  saying  it  was  not  payable  to  his  order, 
that  he  had  no  mterest  in  it  except  to  collect  it,  and  that  the  paying 
bank  had  no  right  to  demand  from  Mm  a  receipt  for  the  money  since  it 
would  have  a  full  and  complete  voucher  in  its  hands  when  it  took  up 
the  cheek.  The  point  here  raised  is  of  long  standing  and  one  that  has 
always  been  difficult  to  settle.  Unquestionably  the  bank  had  no  legal 
right  to  compel  the  collector  of  tlie  check  to  give  an  acquittance  since 
liis  surrender  to  it  of  the  perfect  voucher  was  enough. 

But  the  signature  of  a  so-placed  check  collector  is  a  very  deshable 
thing  for  a  bank  to  have  for  coiToboration  and  reference  should 
an}i:hing  wrong  about  a  paid  check  afterwards  tm-n  up,  and  it  is 
desirable  for  all  Paying-Tellers  to  procure  this  collecting  name  when- 
ever possible.  Few  reasonable  check  collectors  Avill,  under  the  circum- 
stances described,  be  found  disposed  to  refuse  to  furnish  it.  And 
where  checks  are  dra%vn  payable,  for  instance,  to  "J.  Smith,  or 
order,"  to  "order  of  J.  Smith,"  and  are  presented  by  J.  Smith,  the 
bank  would  aLso  do  well  to  secm-e  J.  Smith's  indorsement. 

Even  when  checks  are  drawn  payable  "to  bearer"  many  banks 
make  a  practice  of  requiring  the  indorsement  of  the  collector  if 
presented  at  the  coimter  by  a  party  not  the  signer.  This  is  a  good 
method,  because  it  gives  the  bank  a  name  for  reference  in  case  there 
should  be  trouble  about  the  check  in  the  future. 

PAYING   PART   OF   A   CHECK. 

A  man  came  to  the  bank  with  a  check  upon  it  for  $900,  drawn  by  a 
depositor  in  his  favor  in  payment  of  a  bill.  The  Paying-Teller  decUned 
to  pay  it,  finding  only  $700  to  the  credit  of  the  drawer.  The  holder, 
who  had  good  reasons  for  being  anxious  about  liis  claim  upon  the 
drawer  of  the  check,  liaA'ing  heard  that  he  was  in  a  failing  condition, 
resorted  to  an  ingenious  method.  He  deposited  $200  with  the  Recei\dng- 
Teller  to  the  credit  of  the  drawer  of  the  check,  and  then,  returnmg  to 
the  Paying-Teller,  presented  again  his  $900  check,  and  was  paid  its  full 
amount.  He  had  by  this  shrewd  move  received  only  $700  for  a  demand 
of  $900,  but  this  in  the  end  proved  a  very  hea^'y  dividend  compared 
with  what  otlier  creditors  received  from  the  suspending  debtor. 

There  are  uiteresting  questions  naturally  raised  m  recalhng  a  case  of 
this  description.  Can  a  bank  be  forced  to  pay  part  of  a  check  ?  In 
the  instance  given  could  the  holder  of  the  $900  check  compel  the  bank 


THE    PAYIXG  -  TELLER    AND    IIIS    CASH.  15 

to  pass  over  the  8700  standing  to  the  credit  of  tlie  check  drawer  npon 
giving  tlie  bank  tlie  $900  check  ?  It  is  a  curious  fact  that  there  are 
upon  record  no  legal  decisions  covering  this  point.  Without  doubt  any 
bank  paying  a  part  as  described  and  recei\'ing  the  voucher  for  the 
whole  check  would  be  doing  a  safe  and  justifiable  thing.  It  is  a 
perfectly  regular  and  legitmiate  method  for  a  bank  to  accept  a  deposit 
and  pay  a  short  check.  There  is  notliing  out  of  the  way  either  in  the 
movement  of  the  check-holder  or  the  bank.  The  one  had  a  perfect 
right  to  give  away  his  $200  and  the  other  to  receive  the  deposit  of  the 
$300  and  pay  the  §900  check  when  it  was  made  good. 
A  SMALL  CERTIFICATION. 
The  man  kept  a  rather  small  account  with  the  bank.  He  asked  the 
Paying-Teller  to  certify  the  check  he  was  presenting,  which  check  was 
for  only  fifteen  dollars.  The  Teller  hesitated  about  certifying  a  check 
for  so  small  an  amoiuit,  and  told  the  holder  of  it  that  he  would  prefer 
to  cash  it  upon  the  spot.  The  depositor  objected  most  decidedly  to 
this  latter  method  of  settlement,  peremptorily  demanded  a  certification 
of  it,  and  made  an  appeal  to  the  Cashier  about  the  matter.  This 
dispute  and  i^s  settlement  involved  one  or  two  interesting  points  which 
were  correctly  laid  down  and  settled  by  the  Cashier  in  his  management 
of  the  demand  of  this  pressing  depositor.  There  is  no  question  but 
that  a  power  to  certify  checks  drawn  upon  a  National  bank  does,  by 
the  provisions  of  the  bank  Act,  inhere  in  the  office  of  a  Casliier.  But 
the  Supreme  Court  of  the  United  States  has  ruled  that  the  Directors  of 
a  National  bank  can,  by  formal  vote  and  general  notice  thereof, 
proliibit  a  Cashier  from  exercising  the  power  of  certification.  This 
very  many  of  the  National  banks,  particularly  in  Boston,  have  done, 
being  led  to  do  so  by  the  fact  that  very  disagreeable  complications 
have  arisen  out  of  the  exercise  of  such  Cashier-power  in  some  notable 
cases^ — the  Boston  Mellen-Ward  State  Bank  fraud  being  one  of  the  most 
famous.  But,  as  we  have  said,  in  the  absence  of  prohibition  and  due 
notice,  the  Cashier  of  a  National  bank  can  certify  upon  actual  deposits, 
but  not  in  excess  of  them.  At  the  same  time  it  must  be  borne  in  mind 
that  no  check  presentor  can  compel  a  certifying  bank  to  certify.  The 
bank  can  elect  to  pay,  in  lawful  money  only,  if  the  depositor  refuses 
any  other,  and,  in  ease  of  the  presentation  of  little  checks,  as  in  the 
instance  we  are  quoting,  it  is  certainly  ^vise  banking  to  cash  the  checks 
rather  than  to  set  them  afloat  in  a  certified  shape. 

"GOOD,  WHEN  PROPERLY  INDORSED." 
Checks  upon  banks  are  often  presented  to  them  for  payment  when 
in  want  of  some  indorsement,  or  bearing  upon  their  backs  some  fatal 
irregularity  of  indorsement  wliich  precludes  the  bank  from  making 
payment.  We  have  now  m  mind  such  cases  as  can  not  be  helped  along 
to  a  settlement  by  any  sort  of  a  guarantee  of  indorsements,  or  want  of 
indorsements,  which  can  be  tendered  by  the  collector — the  presentor — of 


16  PRACTICAL    BANKIXG. 

the  lame  check.  In  such  instances  there  is  nothinoj  for  the  presenting 
bank  to  do — supposing,  for  illustration,  that  the  cueck  is  in  the  hands 
of  some  collecting  bank — but  to  return  the  impaid  check  to  the  corres- 
pondent from  whom  it  has  been  sent,  with  a  request  that  the  missing 
indorsement  be  supplied  or  the  faulty  one  strongly  guaranteed,  just  as 
the  case  may  happen  to  demand.  But  the  cheek,  wliieh  is  to  take  a 
journey  back  to  its  senders,  may  have  to  travel  far.  It  is  a  perfectly 
good  check  now  ;  but  when  it  returns  for  a  re-presentation  it  may 
be  the  check  of  an  insolvent.  Here  the  banker  sees  a  risk — a  responsi- 
bility— cropping  out.  How  shall  he  avoid  it  ?  Simply  by  asking  the 
bank  upon  which  the  check  is  drawn,  and  which  concedes  that  it  is  a 
good  check  now,  to  set  aside  the  funds  for  which  it  calls,  till  it  comes 
around  again  in  shapely  form.  And  this  setting  aside  of  the  money 
should  be  done  in  the  regular  way  by  certification  of  the  check.  When 
a  check  is  certified  it  is,  of  course,  charged  to  its  drawer,  and  no  other 
wandering  cheek  can  step  in  between  tliis  one  wliich  has  been  presented 
and  certified  and  returned  on  account  of  informalities  on  its  back.  A 
form  of  certification  specially  fitted  to  the  circumstances  should  be 
used,  and  no  bank  has  a  right  to  refuse  to  certify  checks  in  tliis  way 
imder  the  circumstances  we  have  described.  Here  is  a  good  form  for  a 
certification  of  the  class  we  have  suggested  : 


Natio^^^  SJ^4<^  _Bank, 


ift^t'i^ij^^:/7^  "^^AjDc 


Pay  to  the  ORDEjfc^^"^<^^^^:^^^^^2^^  '^'^<Od-z~- 

(^Ju^e^^^t^  ^Z^^^^^^  Dollars 


No.  592  ^wTS  ^^^^^-ztAJdf  -KJ^^Y^^iS^^'^ 


-^^2^-^ 


COUNT   YOUR   MONEY. 

Whenever  Receiving  or  Paying-Tellers  take  in  money  on  deposit, 
or  in  payment  of  paper  held  for  collection  by  the  bank,  they  intend  to 
count  the  same  at  once — count  it  before  the  parties  Avith  whom  they 
are  dealing  have  left  their  presence.  And  when  dealers  with  a  bank 
receive  from  its  Tellers,  in  the  way  of  check  payments  or  returns  of 
change,  cash  of  any  sort,  they  are  also  expected  to  count  their  money 
before  they  carry  it  away. 

But  these  very  good  rules  have  their  enforced  exceptions.  A  note- 
payer  may  bring  to  the  counter  of  a  bank  a  stack  of  small  bills, 
amounting  to  $50,000,  when  small  bills  are  hea^'y  in  the  market,  and 
tender  the  same  in  payment  of  his  matured  note  which  the  bank  has 
asked  hiu»  to  call  and  pay.     The  National  Bank  Act  says  that  "  every 


THE    PAYIXG- TELLER    AND    HIS    CASH.  17 

National  bank  shall  take  and  receive  at  par  for  any  debt  or  liabUity  to 
it  any  and  all  notes  or  bills  issued  by  any  laAvfully  organized  National 
banking  association." 

The  point  has  sometimes  been  made  tliat  the  payment  of  a  note 
simply  held  for  collection  by  a  National  bank  is  not  a  payment  of  a 
debt  to  it,  but,  without  doubt,  tliis  is  a  strained  point. 

Be  that  as  it  may,  National  banks  are  often  tendered  huge  piles  of 
small  bills  for  debts,  like  notes  discounted,  wliich  no  one  can  term  other 
than  debts  due  to  them.  How  shall  they  manage  such  cases  as  these 
in  the  matter  of  counting  ?  There  seems  to  be  no  other  course  than 
this.  Endeavor  to  get  the  payer  to  leave  his  money  and  the  note  he 
has  called  to  pay  till  the  bank  has  had  time  to  count  his  bulky  bills. 
When  the  bUls  have  been  counted,  and  found  correct,  send  the  payer 
his  cancelled  note.  Or,  if  the  payer  is  a  reasonable  and  perfectly 
responsible  party,  secure  from  him  his  guarantee  that  the  bills  are  all 
right,  and  his  consent  that  the  bank  shall  take  its  time  to  count  them, 
and  then  give  liim  liis  note  on  the  spot. 

There  is  another  point  in  connection  with  this  matter  of  handling 
large  amounts  of  small  bills  which  is  interesting  and  important — a  point 
smiilar  to  the  one  just  discussed,  though  it  covers  transactions  the 
reverse  of  those  named.  Banks  are  often  called  on  to  provide  heavy 
pay-roll  supphes  of  small  bills — supplies  wliich  are  sometimes  suddenly 
called  for  and  which  must  be  filled  at  all  hazards. 

Mill  labor  is  a  most  sensitive  article.  It  has  to  be  handled  with  a 
deal  of  care  and  the  best  of  judgment.  A  manufacturing  company 
may  have  credit  hardly  second  to  the  Bank  of  England,  yet  all  tliis 
might  go  for  notliing  in  the  eyes  of  a  crowd  of  operatives  who,  through 
the  failure  of  the  company's  bank  to  send  to  the  mill  a  supply  of 
cm*rency,  were  not  promptly  paid  oflt"  at  the  due  time.  The  imperative- 
ness of  these  mill-caUs  for  smaU  bills,  taken  in  connection  with  the  fact 
that,  at  some  periods,  they  ai-e  so  difficult  to  be  got  at,  and  that  a  long 
notice  ahead  will  barely  get  them  in  at  the  last  moment,  leads  banks  to 
take  them  on  from  other  sources — particularly  from  other  banks — when 
there  is  no  time  to  count  them  before  paymg  them  out  to  the  mill 
paymasters.  This  method  of  procedure  may  not  be  called  good  banking, 
yet  it  sometimes  appears  to  be  a  necessity,  and  banks  which  are  thus 
driven  into  a  comer  in  the  matter  accept  the  risk  as  a  legitimate  one. 

It  is,  of  com-se,  decidedly  better  that  a  bank  should  never  receive 
and  pay  to  the  third  party  bills  wliich  it  has  not  counted,  but  as  we 
have  explained,  such  action  may  sometimes  be  defensible. 

The  mill  paymasters  are  expected  to  count  bills  so  received  at  once 
and  to  return  straps  where  variations  are  discovered — straps  which  may 
enable  the  bank  to  trace  the  errors  back  to  the  right  sources. 
IDENTIFICATION    AND    IDENTIFIERS. 

Our  banks  make  it  a  rule  not  to  cash  cheeks  that  are  drawn  payable 
to  order,  unless  the  party  presenting  them  is  known  at  the  bank — is 


18  PRACTICAL   BANKING. 

squarely  identified  as  being  the  right  person.  Many  of  our  banks  even 
go  further  than  this  in  this  matter  of  identification,  and  take  the  pos- 
ition tliat  tliey  will  require  identification  where  the  checks  presented 
are  dra^Ti  payable  to  bearer.  If  the  first-named  practice  is  one  resting 
on  justifiable  caution,  the  second  rule  must  be  described  as  caution 
■without  justice ;  for  a  bank  cannot  rightfully  ask  for  the  identification 
of  the  holders  of  these  bearer  checks,  since  their  drawers  waived  that 
demand  when  they  filled  them  up  in  this  way.  But,  be  this  as  it  may, 
banks  certainly  should  be  reasonable  in  tliis  matter  of  requu'ing  iden- 
tifications—  be  ready  and  willuig  to  waive  the  rules  under  certain 
circumstances,  and  assume,  as  a  part  of  the  legitimate  risks  of  their 
business,  the  very  slight  risks  which  good  judgment  will  inctu",  in  now 
and  then  paying  a  check  for  §25  or  so  to  some  well-appearing  man  or 
woman  who  is  so  unfortunate  as  not  to  be  able  to  respond  jiromptly  in 
the  afiirmative  when  the  Tellers  fire  ofl!  the  stereotyped  salute  of  ''Do 
you  know  anybody  in  tliis  bank,  or  do  you  know  anybody  outside  of 
this  bank  who  is  known  in  this  bank  ?" 

If  banks  are  not  employing  Tellers  who  have  sufficient  judgment — 
gumption — to  be  intrusted  with  a  little  latitude  and  discretion  in  tliis 
identification  rule,  they  should  always  have  some  President  or  Casliier 
withm  prompt  and  easy  reach  who  has  the  courage  and  judgment  to 
cut  the  red  tape  at  the  proper  time. 

Every  one  knows  that  it  is  sometimes  just  impossible  for  some 
check-holders  —  strangers  in  strange  cities,  for  instance  —  to  procure 
identifications  ;  and  every  one  has  heard  of  the  amusing,  as  well  as 
aggravating,  incidents  that  have  happened  in  banks  in  eoimection  A^th 
this  identification  controversy  Avith  honest  check-holders. 

In  visits  to,  and  talks  with,  London  bankers  on  this  point,  they  have 
expressed  to  me  gi'eat  surprise  that  banks  m  the  States  kept  up  tliis 
identification  practice,  and  said  they  did  not  see  how  our  banks  in  New 
York,  Boston,  etc. ,  could  ever  get  tlirough  a  day's  business  under  such 
a  rule. 

Long  ago  the  business  men  and  bankers  of  England  became  eon- 
"vinced  that  certainly  London's  banks  could  never  get  tlirough  days' 
works  unless  identification  was  abolished ;  and  Parhament  was  besieged, 
and  besieged  successfully,  for  a  law  authorizing  EngMsh  banks  to  pay 
all  checks  apparently  properly  indorsed  to  parties  presenting  them 
without  identification.  I  have  stood  by  the  side  of  the  paying  Cashier 
of  the  Bank  of  England  and  seen  him  steadily  rattle  out  his  money 
under  this  law  to  all  who  came  Avith  checks. 

Even  when  the  bank  is  following  good  methods  in  this  matter  it  may 
find  its  care  unavailing,  for  banks  have  been  defrauded  by  swindlers 
who  have  ingeniously  and  deliberately  worked  themselves  into  an 
acquaintance  with  them  in  something  after  this  style: 

He  was  a  notorious  scoundrel.  He  came  to  the  city  as  a  stranger 
and  introduced  himself  to  a  large  dealer  in  shares  and  bonds  as,  say, 


THE    PAYING -TELLER    AXD    HIS    CASH.  19 

Mr.  Robert  Jones,  from  the  interior,  who  wished  to  make  some  invest- 
ments in  bonds,  etc.  After  some  little  talk,  he  bought  a  few  hundred 
dollars'  worth  of  securities,  and  paid  the  cash  for  tliem.  A  day  or  two 
after  he  made  another  small  purchase  of  the  same  house,  again  paying 
cash.  Subsequently  he  called  and  said  to  the  dealer  he  had  concluded 
to  sell  a  part  of  the  securities  he  had  first  bought  of  Mm.  The  dealer 
bought  them  of  him,  gi^^ng  him  his  check  upon  Ms  bank.  "  Investor" 
Jones  presented  the  check  at  the  bank.  Was  told  he  would  have  to 
procure  an  identification.  He  said  he  should  be  happy  to  do  so,  and, 
going  out,  he  soon  returned  with  the  dealer  we  have  alluded  to,  who 
said:  "All  right;  this  is  Mr.  Robert  Jones,  a  customer  of  ours." 
Having,  in  tMs  quiet  way,  estabUshed  an  acquamtance  mth  the  bank 
— been  fully  identified  and  introduced  there,  by  a  highly  respected 
dealer — he  had  little  difficulty  in  collecting  there  a  few  days  after  a 
genuine  check  which  he  had  carefully  raised  to  ten  times  its  original 
amount — after  which  Mr.  Jones  left  the  city  and  was  seen  there  no 
more. 

In  \'iew  of  the  carelessness  with  which  some  business  men  will  act 
in  this  matter  of  furnishing  identifications,  and  of  the  losses  wMch 
have  come  upon  many  banks,  under  my  personal  observation,  from 
action  inider  those  ' '  cooked  up  "  identifications,  etc. ,  such  as  I  have 
described,  I  now  fully  sympathize  with  the  sentiments  expresssed  by 
the  bothered  Paying-Tellers  relative  to  this  matter.  ' '  When  a  man 
comes  to  my  desk  now,"  says  the  Paying-Teller  of  the  period,  "saying 
he  knows  the  stranger  who  is  standing  without,  waiting  for  Ms  money 
on  a  check,  I  feel  like  asking  lum,  '  How  much  do  you  know  him  ? '  " 

There  is  a  somewhat  novel  ^'iew  of  the  identification  question  that 
has  sometuues  been  taken  by  rather  pugnacious,  but  honest,  check 
collectors,  which  is  of  this  sort: 

They  say  that  when  they  present  a  check  to  a  bank,  wMch  is 
payable  to  their  order,  and  which  they  order  the  Paying-Teller  to  pay, 
the  Teller  has  no  legal  right  to  assume  that  the  presenter  is  not  the  right 
man — not  the  man  he  represents  Mmself  to  be — and  that  the  Paying- 
Teller  ought  at  once  to  pay  him  the  money,  or  prove  he  is  not  the  man 
he  pretends  to  be. 

I  have  many  times  heard  check  presenters  say  to  the  Teller,  "If 
you  want  any  identification,  go  and  hunt  it  up ;  I  am  not  going  to  do 
so;  but  I  want  my  money."  The  great  drawback  to  the  force  of  tliis 
logic  is  found  in  the  fact  that  the  bank  has  possession — and  laossession 
is  equal  to  much  law. 

It  is  an  excellent  idea  for  Paying-Tellers  to  requh*e  identified 
collectors  of  indorsed  checks,  wMch'  are  not  payable  to  their  order, 
to  put  their  names  upon  the  backs — in  effect  to  receipt  for  the  cash. 
This  recommendation  ^vill  also  apply  to  holders  of  "bearer"  checks 
in  cases  where  it  has  been  thought  wise  to  demand  identification  of 
such  a  holder.    Another  record  that  is  not  only  proper  but  important 


20  PRACTICAL  BAXKIXG. 

is  a  careful  memorandum  upon  the  paid  elieck  of  the  name  and  address 
of  the  person  who  in  that  particular  case  identified  the  payee. 

This  brhigs  up  naturally  the  questions  of  how  much  responsibility 
an  identifier  takes  upon  himself  in  this  volunteer  service,  and  to  what 
extent  the  bank  can  have  recourse  to  liim  m  case  any  trouble  results 
from  the  payment  which  he  helped  along. 

These  are  questions  of  curious  interest.  They  come  up  often  in 
business  and  bankmg  circles,  and  are  easier  raised  than  answered. 

As  an  illustration,  I  will  mention  a  case  of  payment  to  a  stranger 
who  presented  a  check  upon  the  Blank  National  Bank,  purporting  to 
be  payable  to  liis  own  order.  The  stranger  payee  was  asked  to  procure 
an  identification.  The  check  was  for  a  thousand  dollars,  and  was  made 
payable  to  the  order  of,  say,  John  Smith.  Some  one  known  to  the 
bank  was  brought  forward,  who  said  he  knew  the  person  presenting 
the  check  to  be  of  the  name  to  which  it  was  made  payable.  The  check 
was  cashed.  No  record  of  the  identification  of  the  character  which  I 
have  suggested  was  made.  The  check  turned  out  to  have  been  paid 
to  the  wrong  man — to  a  forger — who  had  stolen  it.  The  Teller  knew 
he  had  in  this  case  followed  his  invariable  rule,  and  been  furnished  at 
the  time  of  the  transaction  ^vith  a  satisfactory  identification ;  but  he 
could  not,  for  the  life  of  him,  ever  recall  the  name  of  the  identifier. 
The  matter  ended  in  mystery.  The  bank  lost  the  money.  AVliatever 
responsibOity  attached  to  that  lost  identifier  never  overtook  him. 

But  I  ought  to  add,  that  making  the  recommended  record  of  the 
testimony  of  an  identifier  is  not  always  sure  to  be  of  any  material 
assistance  in  cases  of  fraud  and  loss.     The  Paying-Teller  of  the  First 

National  Bank  of  cashed  for  an  identified  stranger  a  check, 

purporting  to  be  payable  to  Ms  order.  At  the  end  of  the  month,  when 
accounts  were  compared,  it  was  revealed  that  the  stranger  was  a 
swindler,  who  had  stolen  the  check  and  forged  an  indorsement.  When 
the  Pajing-Teller  came  to  re-examine  the  check,  he  fomid  that  he  had 
marked  on  it,  at  the  time  he  paid  it,  the  name  of  his  Receiving-Teller 
as  the  identifier.  This  Receiving-Teller  could  not  recall  any  of  the 
facts  connected  with  tliis  identification.  He  said  he  supposed  he  iden- 
tified the  man,  but  could  not  remember  anything  about  it.  Notliing 
more  could  be  said  or  done;  the  bank  pocketed  the  loss. 

But  this  identifying  responsibility  is,  after  all,  a  very  slight — a  very 
intangible  tiling;  and,  for  that  very  reason,  identifiers  should,  out  of 
regard  for  the  banks,  honest  dealing,  etc.,  be  exceedingly  careful  in 
their  movements  in  this  identification  business. 

If  I  identify  a  check-collectinj^  man  at  a  bank,  I  simply  testify  that 
he  bears  the  name — that  I  know  he  bears  the  name,  which  is  the  name 
to  which  the  check  is  made  payable.  1  don't  even  assert  that  he  is  the 
right  man;  for  there  may  be,  somewhere,  another  man  of  the  same 
name,  who  is  the  right  payee,  and  this  man,  whom  I  am  identifying, 
may,  by  error  or  fraud,  have  obtained  possession  of  the  paper.     1  do 


THE    PAYING -TELLER    AND    HIS    CASH.  21 

not  vouch  for  his  honesty,  for  his  financial  responsibility,  or  for  any- 
thing, except  that  I  well  knoAV  his  name  to  be  so  and  so.  Of  course,  I 
should  never  intend  to  identify  hiui  at  my  bank,  imless  I  supposed  he 
■was  all  right  in  all  resj)eets.  But  I  am  discussing  the  purely  legal 
aspects  of  this  identification  bushiess  ;  and  the  conclusions  which  I 
reach  are  in  accordance  with  decisions  wliich  have  been  made  time  and 
time  again,  and  in  accordance  with  common  law  and  common  sense. 

And  ruiless  it  can  be  shown  that  I  have  been  in  collusion  with  a 
fraud,  aided  by  my  identification — that  I  have  not  been  entirely  honest 
and  innocent  in  my  part  of  the  business — I  can  not  be  held  at  all 
responsible  in  the  premises. 

I  have  been  kindly  furnished,  by  a  Massachusetts  bank  Cashier, 
with  the  story  of  this  interesting  case — a  case  where  a  bank,  tlirough 
no  fault  of  its  own,  lost  ^250,  by  cashing  a  check  for  the  wrong  man 
who  happened  to  bear  the  right  name. 

His  name  was  Nolan — John  Nolan.  In  the  directory  of  the  city  of 
this  incident  there  were  many  Jolin  Nolans — twenty  or  so.  The  letter 
carrier  deUvered  to  this  bad  John  Nolan  a  letter  addressed  John 
Nolan,  containing  a  check  for  §250,  payable  to  order  of  John  Nolan. 
This  Jolm  Nolan,  the  fraud,  took  the  check  to  a  bank  where  he  was 
known  as  Jolin  Nolan,  indorsed  it,  and  raised  the  money  on  it.  In 
time  the  right  John  Nolan  turned  up,  proved  that  the  other  Jolm 
Nolan  had  stolen  his  check,  and  forged  liis  indorsement,  and  demanded 
and  obtained  the  §250  from  the  victimized  bank.  The  Casliier  of  this 
bank,  who  is  a  very  careful  man,  had  exercised  extreme  care  m  this 
check-cashing  transaction.  He  had  reason  to  beheve  that  the  thie^^ng 
John  Nolan  was  hkely  to  receive  a  $250  check,  knew  his  name  and 
person  well,  and,  when  he  cashed  the  check,  asked  him  particularly  if 
he  was  the  right  John — the  John  named  in  face  of  the  check — 
carefully  cross-examined  hun  on  this  point.  So,  as  in  duty  and 
conscience  bound,  the  bank  assumed  the  loss,  and  attached  no  blame 
to  their  Casliier — assumed  the  loss  as  the  result  of  one  of  the  ine\'itable 
risks  of  doing  a  bank  business.  The  forger  had,  of  course,  taken 
himself  off  into  some  non-extraditing  country. 

There  is  a  simple  point  of  importance  and  interest  that  must  here 
come  to  the  mind  of  any  experienced  banker.  It  is  this :  Ought  not 
the  drawer  of  a  check  to  the  order  of,  say  John  Smith,  of  New  York, 
or  Boston,  to  define  in  liis  order  which  John  Smith  is  the  John  Smith 
to  whom  he  is  ordering  a  payment  ?  And,  may  not  the  omission  so  to 
do,  under  some  circumstances,  throw  upon  a  drawer  some  responsibility 
in  case  such  a  check  is  mailed  into  the  hands  of  a  real,  but  dishonest, 
John  Smith,  who  steals  it  and  forges  on  it  ? 
PAYING  UNINDORSED   CHECKS   WITH   CERTIFICATES   OF   DEPOSIT. 

A  very  heavy  customer  of  the  bank,  whose  cm-rent  daily  balance 
was  large  and  who  seldom  asked  for  accommodation  of  any  kind, 
presented  in  person  his  perfectly  good  check  upon  the  bank  for  one 


23  PRACTICAL    BAXKIXG. 

liuiulrod  thousand  dollars.  The  check  was  drawn  to  the  order  of  an 
individual  who  had  not  indorsed  it.  The  drawer  asked  that  the  check 
be  certified,  A\'ithout  qualification,  in  its  then  unindorsed  condition. 
The  bank  would  have  been  perfectly  willing  to  do  this  if  it  had  not 
been  for  the  fact  that  its  Directors  had  voted  to  proliibit  the  Cashier 
from  ever  certifying  cheeks.  If  it  had  certified  this  unindorsed  check 
it  would  have  used  the  certification  form  of  "Good  when  properly 
indorsed."  The  customer  was  annoyed  on  account  of  the  Cashier's 
enforced  refusal  to  certify,  because  he  wished,  in  paying  the  check  to 
its  payee,  to  seeui'e  upon  it  his  indorsement  as  a  receipt,  a  voucher,  in 
a  transaction  he  was  making,  and  this  payee  had  refused  to  take  the 
check  in  settlement  without  a  certification  of  it  by  the  bank  upon 
which  it  was  drawn.  The  signer  of  the  check  now  asked  that  a 
certificate  of  deposit,  di-aAvn  in  favor  of  the  payee  of  the  check,  be 
issued  upon  the  check  in  its  still  unindorsed  condition,  since  the  signer 
of  the  check  could  not,  under  the  circumstances,  secure  the  payee's 
indorsement.     This  request  the  bank  very  correctly  declmed  to  grant. 

This  little  banking  incident  brings  up  two  important  details,  whether 
a  bank  should  give  an  unqualified  certification  of  an  unindorsed  check 
and  the  question  of  the  propriety  and  safety  of  the  practice  of  paymg 
an  unindorsed  check  by  issuing  therefor  a  certificate  of  deposit  drawn 
in  favor  of  the  payee.  Without  doubt  the  experienced  banker  who 
gives  careful  thought  to  these  points  A^ill  agree  m  the  opinion  that  it 
would  not  have  been  good  banking  to  accede  to  either  of  the  requests 
made  by  the  depositor  in  the  case  above  described. 

CHECKS    PRESENTED    AFTER   DEATH    OF    THE   DRAWER. 

There  are  many  questions  raised  in  practical  banking  relative  to 
the  rights  and  duties,  both  of  banks  and  then*  dealers,  under  certain 
circumstances  and  situations  which  have  to  be  settled  on  their 
individual  bearings,  as  they  from  time  to  time  come  up  and,  in  some 
cases  we  have  in  mind,  bankers  and  business  men  appear  forced  to 
move  without  the  aid  of  legal  decisions,  customs  or  statutes. 

For  illustration,  the  law  declares  in  most  States  that  a  bank  shall 
stop  the  payment  of  a  check  whose  signer  has  died  before  its  presenta- 
tion. In  the  busy  whirl  of  every-day  banking,  in  large  places,  our 
Tellers,  who  have  about  as  much  as  they  can  do  to  attend  to  the 
pressing  demands  of  the  living,  as  they  swarm  in  upon  them  with  their 
demands  and  their  deposits,  cannot  possibly  keep  the  run  of  all  the 
deaths  that  are  currently  taking  place  among  their  check  drawers. 
They  incidentally  hear  promptly  of  some  of  them  ;  others  may  not  come 
to  their  ears  for  a  long  time.  So  it  happens  that  banks  are  every  day 
paying  checks  of  men  who  are  dead.  It  seems  impossible  for  them  to 
establish  any  system  by  which  this  sort  of  payments  shall  be  avoided. 
Whatever  may  be  the  law,  equity  will,  without  doubt,  save  them  from 
any  damages  in  cases  of  this  description,  should  such  seem  to  threaten. 

Since   the  customs  relative   to  the   treatment  of  checks  vary  so 


THE    PAYING -TELLER    AXD    HIS    CASH.  23 

■widely,  and  in  \new  of  tlie  fact  that  the  law  gives  out  an  uncertain 
sound,  we  are  glad  to  find  that  the  Massachusetts  Legislature  has  taken 
the  subject  in  hand  and  given  us  firm  ground  in  that  State  upon  which 
to  stand. 

The  following  bill  passed  the  Massachusetts  Legislature  by  a  unani- 
mous vote  in  1885,  and  it  is  to  be  hoped  that  the  Legislatures  of  other 
States  will  take  similar  action. 
AN  ACT  TO  Authorize  the  Payment  of  Checks,  Demand  Drafts  and  Savings 

Bank  Orders,  in  Case  of  the  Death  of  the  Drawer  before  Payment. 
Be  it  enacted,  etc.: 

Section  I .  Any  depositary,  su  bject  to  withdrawal  by  check  or  demand  draft,  may 
pay  anj' check  or  demand  draft  drawn  by  any  pei^son  who  has  funds  on  deposit  to 
meet  the  same,  notwithstanding  the  death  of  such  drawer  in  the  interval  of  time 
between  di-awiug-  such  check  or  demand  draft  and  its  presentation  for  payment, 
when  such  presentation  shall  be  made  within  ten  days  after  the  date  of  such  check 
or  demand  draft. 

Section  2.  Savings  banks  and  institutions  for  savings  are  hereby  authorized  and 
empowered  to  pay  any  savings  bank  order,  drawn  by  any  person  who  has  funds  on 
deposit  to  meet  the  same,  notwithstanding  the  death  of  such  drawer  in  the  intei-val 
of  time  between  signing  such  savings  bank  order  and  its  presentation  for  payment, 
when  said  presentation  shall  be  made  within  thirty  days  after  the  date  of  such  savings 
bank  order,  and  at  any  subsequent  period,  provided  the  depositary  has  not  received 
actual  notice  of  the  death  of  the  drawer. 

When  the  steamer  City  of  Columbus  went  down  on  the  Massachusetts 
coast  many  very  prominent  Boston  business  men  lost  their  lives.  Among 
them  was  the  Hon.  E.  S.  Rand,  of  Boston,  who  was  a  conveyancer  of 
extensive  practice  and  a  manager  of  many  trust  estates. 

The  embarassments  that  were  entailed  upon  the  holders  of  his  out- 
standing checks  were  the  proximate  cause  of  this  legislative  action 
which  I  have  described. 

HE   FOUND    IT    OUTSIDE    THE   COUNTER. 

There  are  many  curious  incidents  happening  m  connection  with 
banking  that  might  properly  be  gathered  imder  the  newspaper  headmg 
of  ''Lost  and  Fotind."  I  remember  a  case  where  the  Paymg-Teller  of 
a  bank  was  told  by  a  customer,  to  whom  he  was  paying  the  cash  for  a 
check  of  §500,  that  he  had  passed  him  out  only  ^50.  The  bills  laid 
upon  the  Teller's  counter — had  not  been  removed  from  thence  by  the 
customer.  So  he  passed  them  back  to  the  Paying-Teller,  saying  : 
"  There  they  are;  count  them  for  yourself."  The  Teller  counted,  found 
the  money  850  short,  and  passed  out  another  $50  bill.  Soon  after 
another  customer  came  to  this  covmter.  Looking  down,  he  saw,  upon 
the  floor,  standing  upon  its  edge  against  the  partition,  a  $50  bill,  wliicb 
he  picked  up  and  passed  to  the  Teller,  simply  remarking:  ''  You  seeiri 
to  be  very  careless  with  your  money  here."  The  bill  had  been  lost  on 
its  short  trip  from  the  Teller  to  the  last  check  collector. 

This  little  incident  brings  forcibly  before  us  the  question  of  owner- 
ship of  valuables — money — found  within  a  bank,  yet  outside  of  its 
counters,  by  persons  who  happen  to  be  calling  at  the  bank. 

The  premises  of  a  bank,  outside  of  its  counters,  is  a  public  place. 
"Finding"  there  is  the  same  thing  as  finduig  on  the  highway.     The 


24  PKACTICAL    BAXKING. 

person  who  picks  up  money  there  should,  of  course,  report  at  once  to 

the  bank.     There  is  every  chance  that  it  belongs  either  to  the  bank  or 

some  of  its  customers,  who  will  miss  it,  and  be  coming  to  the  bank  in 

search  of  it.     If  in  the  end  the  bank  can  show  no  claim  to  it,  and  no 

other  owner  appears  for  it,  it  reverts  to  the  fhider,  who  has  all  the  claim 

to  it  that  State  laws  will  allow  him. 

The  statutes  of  the  various  States  governing  "finds"  vary  uuich. 

They  generally  provide  for  action  under  such  circumstances  somewhat 

of  tliis  character:    The  person  who  finds  property  of  value  above  a 

certain  sum — say  $5 — must  make  the  most  strenuous  endeavors  to  find 

the  owner  by  advertising  and  registering.      If,  after  a  long  time,  no 

owner  is  found  the  money  astray  goes  to  the  finder  and  State  in  equal 

proportions. 

BOTH    SIDES  OP   THE   GRATING. 

Of  a  kindred  nature  to  our  last  case  and  yet  Avith  a  vital  difference 
is  the  incident  of  wliich  I  find  the  following  mention  in  a  London  paper : 

He  said,  being  in  the  witness-box  when  he  made  this  statement,  that 
he  was  a  London  barrister.  He  received  a  notice  fi'om  the  London  &: 
County  Bank  that  a  bill  for  £43  10s.,  of  which  he  was  the  acceptor, 
would  fall  due  on  the  following  Saturday,  and  he  was  requested  to  come 
down  to  that  bank  between  2  and  3  o'clock  P.  M. ,  on  the  Saturday 
named  and  pay  it.  He  took  his  money  to  the  bank  on  the  day  and 
hovu'  named,  together  with  the  notice  that  had  been  sent  huu,  and, 
according  to  his  own  positive  swearmg,  passed  the  whole  tln*ough  the 
Teller's  opening  in  the  bronze  railing  and  demanded  his  voucher.  A 
stranger  standing  by  put  out  his  hand,  stole  the  money  and  decamped. 

The  Teller  of  the  London  &  County  Bank  swore  out  of  the  ^xitness- 
box  that  he  saw  nothing  of  the  money,  that  it  could  not  have  been 
pushed  through  the  opening,  and  that,  if  it  was  brought  to  the  counter 
at  all,  it  must  have  been  laid  down  outside  of  his  railing. 

The  whole  question  seemed  to  turn  on  the  pomt  of  whether  the  bank 
really  ever  had  possession  of  the  money  or  not.  The  weight  of  the 
testimony  seemed  to  support  the  idea  that  the  money  did  not  get  into 
the  hands  of  the  bank — that  it  was  in  the  custody  of  the  bai'rister  when 
it  was  lost,  and  a  verdict  was  rendered  accordingly. 

I  relate  this  because  incidents  in  practical  banking  repeat  them- 
selves, and  we  cannot  too  often  warn  Tellers  and  dealers  against 
repetitions  of  such  rascaUty.  I  add  also  a  couple  of  such  cases  of 
wliich  I  have  personally  known,  and  call  attention  to  the  fact  that  the 
accomplished  clerk  on  the  inside  of  the  grating  appears  to  have  been 
the  careless  man  in  these  cases,  from  Avhich  we  judge  that  neither  party 
can  be  too  particular  in  manipulating  cash  passing  between  them. 

Bank  Directors  are  in  the  habit  of  gomg  behind  the  counters  of 
their  bank — of  passing  around  among  the  dillerent  departments,  Aasiting 
the  Casliier  and  the  various  ofiieers,  sometimes  for  the  purpose  of  seeing 
how  the  machinery  of  banking  is  running,  and  often  for  the  purpose 


THE    PAYING -TELLER    AND    HIS    CASH.  25 

of  having  little  items  of  their  banking  business  attended  to.  A  leading 
Director,  who  afterwards  became  the  President  of  the  bank,  came  to 
the  desk  of  the  Paying-Teller  by  this  inside  Director's  route  of  which  I 
have  spoken.  His  errand  was  in  part  the  collection  of  his  check  on  the 
bank,  which  he  held  in  his  hand.  The  Paying-Teller  was  busy,  and  so 
the  Director  laid  his  check  upon  the  Teller's  desk  unobserved  by  the 
Teller,  and  passed  on  to  another  department  of  the  bank,  intending  to 
return  in  a  few  minutes  for  his  money.  Tlie  Paying-Teller  soon  saw 
the  check  left  by  the  Director.  At  the  same  time  he  saw  a  gentlemanly 
appearing  man  standing  in  a  waiting  attitude  outside  his  counter  at  the 
opening  where  the  Teller  interviews  the  outside  world  and  passes  them 
over  the  cash.  He  jumped  at  once  to  the  conclusion  that  this  outsider 
was  the  holder  of  the  cheek  mentioned,  had  passed  it  in  and  was 
waiting  for  his  money.  The  Teller  paid  the  amount  of  the  check  to 
the  cool  and  gentlemanly  outsider,  who  at  once  passed  out  of  the  bank 
with  the  money  and  was  never  heard  from  in  that  bank  again.  The 
Director  soon  turned  back  to  collect  his  check,  and  the  blimder  was  at 
once  revealed.  In  the  end  the  "Director  was  paid  the  amount  of  his 
check,  which  was  charged  to  the  unfortunate  Teller. 

Another  Paymg-Teller,  who  was  a  very  careful  officer  and  with  long 
experience  in  banking,  was  in  the  habit  of  handling,  at  the  time  of 
which  we  are  writing,  a  very  large  amount  of  cash  gold.  There  were 
then  no  coin  certiiicates  or  Treasury  notes,  and  all  settlements  between 
banks  and  all  customs  duties  Avere  paid  in  the  solid  gold.  Some  dealer 
with  the  bank  passed  in  his  check  for  ^2,500,  and  asked  that  it  be 
cashed  in  gold — made  this  request  of  the  busy  TeUer  and  then  patiently 
waited  for  the  gold  coin  to  be  passed  out  to  liim.  Soon  the  bag  of  gold 
was  shoved  out  through  the  aperture.  A  few  mmutes  after  the  pay- 
ment the  Teller  glanced  up  from  his  work  and  saw  the  f 3, 500-check 
man  still  standing  before  the  Paying-Teller's  opening  m  an  apparently 
waiting  attitude.  The  Teller  looked  at  him  inquirmgly,  and  was  told 
by  the  customer  that  he  would  like  liis  gold.  The  startling  revelation 
was  then  made  that  the  wrong  man  had  taken  the  bag  of  gold  fi'om 
mider  the  eyes  of  both  Teller  and  check-di'awer  and  walked  out  of  the 
bank  with  it  upon  his  shoulder  in  regular  bank  Messenger  style.  Tliis 
was  afterwards  testified  to  by  a  bystander.  Search  for  the  thief  and 
the  money  was  unavailing.  The  bank  assumed  the  loss  on  the  ground, 
I  suppose,  that  it  was  one  of  the  legitimate  risks  of  doing  a  banking 
business,  and  deducted  the  amount  from  the  Paying-Teller's  salary. 
Yet  any  practical  banker  must  see  that  there  was  carelessness  both  on 
the  part  of  the  Teller  and  the  check-drawer  which  this  story  may  lead 
other  Tellers  and  check-drawers  who  read  it  to  avoid. 
THE    TELLER   AS    A   DETECTIVE. 

The  Paying-Teller  was  a  thousand  dollars  short  at  the  close  of  a  day 
of  active  payments,  and,  after  he  had  exhausted  every  means  at  hand 
for  finding  the  missing  money,  and  counted  and  i*e-counted,  added  and 


26  PRACTICAIi    BAXKIXG. 

re-added  until  he  was  weary  over  the  fruitless  hunt,  he  began  to  try  to 
recall,  as  Paying-Tellers  always  will  under  such  circumstances,  all  the 
paying-out  transactions  he  had  gone  through  during  the  day  with  a 
view  of  discovering  what  may  be  termed  an  individual  location  of  his 
loss — that  is,  he  tried  to  think  of  some  cases  in  that  day's  work  Avhere 
he  had  cashed  checks  in  a  way  that  might  account  for  the  uiissmg 
thousand  dollars.  After  much  reflection  he  suddenly  came  to  the 
conclusion  that  the  deficiency  was  caused  by  over-paying  a  small  check 
which  he  had  cashed  for  a  man  in  humble  circumstances,  a  hack-driver 
who- lived  in  a  remote  part  of  the  city.  Firm  in  tliis  conviction — really 
positive  m  the  matter— he  him  ted  up  the  poor  hackman,  finding  him 
on  his  box  on  a  rainy  night,  and  closely  questioned  him  regarding  the 
transaction  he  had  that  day  with  the  bank.  The  driver  assured  the 
Teller  that  he  had  only  the  money  belonging  to  him,  and,  as  if  to  prove 
it,  hauled  out  of  his  pocket  the  roll  of  bills  in  just  the  shape  (as  he 
said)  that  the  Teller  had  paid  them  to  liim.  There  was  nothing  more 
that  the  Teller  could  do  in  this  direction  ;  but  he  came  away  from  the 
man  confident  that  he  had  placed  that  thousand — confident,  too,  that 
he  was  a  hard  and  suspicious  looking  character.  A  week  or  two  after 
this,  when  the  Paying-Teller  had  become  thoroughly  discouraged  over 
the  prospect  of  finding  the  "short,"  a  very  honest  old  gentleman,  hving 
back  in  the  country,  came  into  the  bank  and  paid  the  Teller  a  tliousand 
dollars  which  he  said  had  been  over-paid  liim  on  the  day  of  which  we 
have  been  writing,  and  which,  for  some  reason  or  other,  he  had  not 
promptly  discovered  and  reported.  Paying-Tellers  are  sometunes  apt 
to  be  too  confident  m  their  theories  when  they  come  to  the  work  of 
"thmking  up"  the  location  of  an  over-payment  ;  and  they  are  also 
sometimes  mistaken  when  they  attempt  to  judge  men  by  appearances. 
In  the  case  we  have  just  described  we  have  an  illustration  of  both  of 
these  points. 

But  the  Teller  is  not  always  mistaken,  and  we  balance  the  last 
anecdote  with  the  following  : 

It  was  a  check  for  one  hundred  dollars,  and  the  presenter  of  it  said 
he  would  like  it  all  in  ten  dollar  bills.  The  busy  Paying-Teller,  by  one 
of  those  lapses  which  will  happen  to  the  best  of  Tellers,  reached  liis 
hand  into  the  wrong  division  of  his  cash  drawer — into  the  pai'titioa 
holding  the  hundred  dollar  bills — and  passed  the  check  collector  ten 
one  hundred  dollar  bUls.  The  man  took  them,  counted  them,  passed 
out  <jf  the  bank,  and  continued  on  his  travels  to  a  distant  city,  for  he 
was  by  profession  a  commercial  traveler.  At  the  close  of  the  day's 
business,  when  the  Teller  settled  his  cash,  he  found  it  nine  hundred 
dollars  short.  He  then  ran  over  the  various  paying-out  transactions  of 
the  day,  and  soon  vividly  recalled  this  hundred  dollar  check  affair  and 
the  blunder  he  nuist  have  made  in  connection  with  it.  Such  things 
will  sometimes  flash  back  upon  the  minds  of  experienced  Tellers  with 
wonderful  clearness.     He  at  once  knew  the  man  who  had  received  his 


THE    PAYING  -  TELLER    AND    HIS    CASH.  27 

1900.  But  the  thing  now  was  to  find  him.  It  is  sufficient  to  simply 
say  tliat  he  was  found  and,  on  refusing  to  pay  back  at  once  the  money 
whicli  belonged  to  the  bank,  was  arrested  on  the  charge  of  having  $900 

in  his  possession  belonging  to  the Bank.    The  man  was  as  nmch 

a  thief  as  if  he  had  put  his  hand  directly  into  the  till  of  a  bank  and 
stolen  outright  $900.  The  man  who  is  over-paid  by  a  bank,  and  who 
does  not  promptly  report  such  over-payment  to  the  sufferer,  is  by  the 
rules  of  law,  equity  and  common  sense  deemed  guilty  of  open  robbery. 
Yet  there  are  those  who  sometimes  seem  to  be  hardly  aware  of  this. 
RAISED  CHECKS. 
He  drew  a  check  upon  a  bank  for  $50  m  his  usual  neat  and  careful 
manner  upon  one  of  his  regular  cheek  forms.  Neither  the  paper,  the 
ink  nor  the  filling  up  Avere  of  a  character  to  aid  or  encourage  fraud. 
Yet,  nevertheless,  this  check  was  manipulated  in  a  fraudulent  manner. 
After  having  passed  out  of  the  hands  of  its  payee,  bearing  his  indorse- 
ment, it  fell  into  the  clutches  of  a  rogue  who  removed  with  acids  the 
$50  and  inserted  $1,000  in  its  place.  In  this  altered  condition  the  check 
was  presented  to  the  bank  upon  which  it  was  drawn,  and,  by  request 
of  its  identified  holder,  who  was  the  raiser  of  the  check,  it  was  certified 
good  for  the  raised  amount.  In  this  certified  condition  it  was  cashed 
for  the  full  sum  by  an  innocent  party  and  by  him  deposited  in  another 
bank,  from  which  it  came  through  clearing  to  the  certifying  bank  for 
collection.  But  this  bank  had,  in  advance  of  its  presentation,  dis- 
covered that  the  check  was  a  fraud  and  refused  to  pay  more  than  $50 
for  the  check,  this,  the  original  amount,  being  all  that  could  be  charged 
upon  it  to  the  depositor  who  drew  it.  Here  was  an  interesting  compli- 
cation. In  the  end  the  drawee  bank  was  sustained  in  the  position  it 
had  taken  and  obliged  to  pay  only  $50.  The  loss  of  the  $950  fell  upon 
the  innocent  party  who  had  first  been  victimized.  And  this  is  where 
losses  of  this  and  similar  character  are  always  placed.  The  inan  who 
in  good  faith  was  unfortunate  enough  to  cash  for  another  a  check 
which  had  been  raised  from  $50  to  $1,000  lost  the  difference  between 
the  two  sums,  his  only  recoiu'se,  which  was  to  the  party  for  whom  he 
cashed  the  check,  being  of  no  value,  since  the  scoundrel  could  not  be 
found.  The  fact  that  the  bank  had  certified  the  check  as  good  for 
$1,000  did  not  help  him,  since  the  law  does  not  hold  banks  liable  in 
such  matters  where  they  have  exercised  proper  care  any  more  than  it 
would  if  they  cashed  a  check  bearing  forged  endorsement.  A  bank  is 
responsible  for  the  signatures  of  its  drawers,  but  it  cannot  be  supposed 
to  know  the  signatures  of  endorsers  nor  whether  a  check  may  or  may 
not  have  been  ingeniously  raised.  For  these  last  contingencies  the 
reliable,  identified  person  for  whom  they  have  cashed  the  check  is  fully 
responsible. 

The  certification  in  the  case  in  question  did  not  help  the  matter  as 
far  as  the  last  holder  of  the  check  was  concerned  and  did  not  prejudice 
the  bank  in  the  least.     If  the  bank  had  paid  the  full  face  of  the  check 


28  PRACTICAL  BAXKIXG. 

on  its  first  presentation  it  could  have  demanded  the  8950  back  from  the 
collector.  In  certifying  instead  of  paj-ing  it  certainly  placed  itself  in 
no  worse  position  than  if  it  had  immediately  paid  the  81,000. 

THE    TELLER   WHO    WAS    SHORT. 

He  was  the  Paying-Teller  of  the  largest  bank  in  a  leading  city,  had 
held  that  position  for  a  long  time,  and  was  considered  an  able,  honest 
and  most  faithful  officer.  He  worked  early  and  late  and  was  somewhat 
noted  for  the  rapidity  and  correctness  with  which  he  handled  money 
in  payment  of  the  checks  drawn  upon  the  bank. 

One  morning  the  Teller  of  another  bank  upon  the  same  street  came 
to  the  desk  of  this  Paying-Teller  and  said  he  wished  to  report  to  him 
an  error  of  three  cents  which  he  had  made  several  days  before  in  a 
transaction  between  the  two  banks.  The  report  and  the  rectification 
were  received  with  apparent  gratitude  by  the  Paying-Teller,  who  said 
that  he  had  been  hunting  everywhere  for  many  days  to  find  that  tliree 
cents. 

It  is  a  curious  fact  that  this  little  incident  happened  just  at  the 
time  when  the  Paying-Teller  was  at  the  end  of  his  rope,  as  it  were, 
after  a  long  period  of  irregularities  in  his  department.  The  day  of 
exposure,  disgrace  and  punishment  was  at  hand,  and  on  the  forenoon 
when  he  made  tliis  remark  about  the  long  hunt  for  three  cents  he  hung 
himself  in  the  basement  of  the  bank.  AVlien  his  books  were  examined 
he  was  found  to  be  a  defaulter  to  a  large  amormt. 

The  experienced  banker  who  has  been  brought  into  close  connection 
with  bank  officers  who,  undiscovered,  were  engineering  along  defal- 
cations can  generally  testify  that  the  most  remarkable  thing  about 
these  defaulters  has  been  the  coolness  and  self-possession  they  have 
shown  wliile  up  to  then-  eyes  in  wrong-doing. 
GOLD    AND    SILVER. 

An  e::?perienced  Paying-Teller  will  give  you  many  interesting  as 
well  as  surprising  facts  regarding  the  weight,  bulk  and  supply  of 
gold. 

Eight  thousand  million  dollars'  worth  of  gold  are  now  said  to  be  in 
use  in  the  world.  In  such  statistics  as  these  we  shall  be  satisfied  if  we 
get  within  a  few  dollars  of  the  truth. 

The  total  j^roduct  of  gold  from  the  earliest  times  amounts  to 
^14.000,000,000,  so  it  seems  $6,000,000,000  of  gold  has  disappeared. 
Now  comes  up  very  naturally  the  curious  question,  Where  is  it  ?  since 
nothing  made  from  gold  is  ever  intentionally  destroyed  and  the  noble 
metal  is  peculiarly  indestructible.  In  olden  times  immense  amounts  of 
gold  were  used  in  ornamentations  for  temples  for  religious  worship. 
What  has  become  of  all  those  articles  made  of  solid  gold  of  which  we 
read  whicli  adorned  those  ancient  edifices  ?  Wliere  are  the  golden 
altars,  the  candlesticks  and  the  clinging  vines,  all  of  solid  gold,  of 
those  ancient  temples  ?     In  those  far-off  days  of  the  past  vast  amounts 


THE    TAYING  -  TELLER    AXD    HIS    CASH.  29 

of  gold  were  used  for  personal  decorations.  The  painter  and  the 
historian  have  given  us  glowing  pictures  of  Cleopatra  floating  down 
the  Nile,  reclining  amidst  her  slaves  and  admirers  in  scanty  attire, 
loaded  with  ornaments  of  gold.  What  has  become  of  all  this  twenty- 
four  carat  fine  ancient  jewelry  ? 

Gold,  as  a  metal,  has  some  very  peculiar  characteristics  which 
certainly  are  not  fully  understood,  and  which  are,  in  fact,  subjects 
of  discussion  and  dispute  even  among  the  eminent  scientists  who  have 
given  them  most  attention.  Some  philosophers  have  advanced  the 
idea  that  it  evaporates.  Though  the  m.ost  ductile  and  the  most 
completely  proof  against  fire  and  rust  of  all  the  metals,  it  is,  at  the 
same  time,  wonderful  stuff  for  wearing  out. 

If  you  Avill  tell  me  what  has  become  of  the  gold  of  which  your 
watch-case  was  made  for  which  you  paid  $40  twenty-five  years  ago, 
buying  it  by  actual  weight,  and  which  wdll  not  to-day  bring  you  over 
830  if  again  sold  by  weight,  I  think  I  can  answer  the  hard  gold 
conundrums  I  have  just  raised.  But  the  fact,  statisticians  say,  is  as  I 
have  stated  :  fourteen  thousand  milhons  of  dollars  worth  of  gold  is  the 
total  product  from  the  earliest  tunes,  and  only  eight  thousand  millions 
are  now  in  existence. 

Those  who  have  not  locked  into  the  matter  will  be  surprised  at  some 
figures  regarding  the  space  needed  for  storage  of  gold.  A  milUon  of 
gold  in  §5,000  bags  occupies  only  about  eight  cubic  feet  and  one  hun- 
dred thousand  dollars  m  $5,000  sacks  can  be  piled  in  1,440  cubic 
inches,  so  that  if  we  dispense  with  the  canvas  bags  and  dump  in  coins, 
ornaments  and  bullion  in  one  solid  mass,  one  of  our  modern  banking 
rooms,  say  about  80  feet  by  50  feet,  with  a  height  of  16  feet,  would  hold 
aU  the  world's  stock  of  gold— the  entire  $8,000,000,000,  but  it  wUl  be 
well  to  select  for  the  experiment  a  room  pretty  near  the  basement  story 
as  it  will  need  to  sustain  a  weight  of  nearly  15,000  tons. 

An  ounce  of  gold  may  be  said  to  be  worth,  inti'insically,  all  the  value 
it  commands,  either  in  use  as  coin  or  as  employed  in  the  arts,  since 
every  dollar's  worth  of  it  represents  a  dollar's  worth  of  labor  in  digging 
it  from  the  earth,  stamping  it  out  of  the  quartz  rocks,  or  washing  it 
from  the  sands.  And,  according  to  the  appearance  of  things,  a  present 
dollar's  worth  of  gold  will,  before  long,  be  worth  more  than  a  present 
dollar. 

On  the  one  hand  we  find  decreasing  production  of  gold,  and,  on  the 
other,  increasing  consumption.  The  decrease  in  production  has  been 
steady,  constant  and  important,  since  1861. 

In  the  five  years,  including  and  ending  with  1861,  the  world's  annual 
production  of  gold  averaged  695  millions  of  dollars  ;  in  the  next  five 
years  the  average  dropped  to  680  millions ;  in  the  five  years  ending  1871 
to  640  millions;  in  1876  to  590  millions;  in  1881  to  535  millions;  m  1885 
to  425  millions.  These  striking  figures  indicate  in  a  most  unmistakable 
style  the  gold  drift  of  the  period.    Unless  some  new  and  undreamed-of 


30  PRACTICAL    BAXKIXQ. 

plantations  of  the  king  of  all  metals  are  shortly  discovered  we  shall 
find  gold  risinj?  materially  in  price  the  world  over. 

Pure  gold  is  a  very  soft  substance,  and  cannot  well  be  used  in 
jewelry,  such  as  watch  chains,  watch  cases,  etc.,  without  bemg  hardened 
by  an  alloy  to  about  14  carats.  Used  as  coin,  it  must  be  hardened  some- 
what or  it  would  wear  out  too  fast.  So  the  American  double-eagle 
and  the  subsidiary  American  gold  coins  are  alloyed  with  copper  to  a 
standard  of  21  6-10  carats.  Australian  gold  coins  are  alloyed  with 
silver,  and  American  gold  coins  were  formerly  alloyed  with  this  same 
metal.  English  and  French  gold  coins  are  slightly  finer  than  ovu-  own, 
having  a  standard  of  22  carats. 

I  learn  that  eight  millions  of  gold  are  annually  consumed  in  the  arts, 
and  the  latest  figures  I  have  seen  make  the  gold  coin  of  the  United 
States  worth  8287,000,000  and  the  silver  8112,000,000. 

Manufacturing  jewelers,  in  melting  and  working  gold,  obtain  their 
supply  of  the  precious  metal  by  buying  old  gold  in  whatever  manu- 
f  actiu'ed  shape  it  may  present  itself — in  ingots,  which  are  simply  masses 
of  tmcoined  gold,  and  in  bullion  and  coin. 

The  American  double-eagle,  whicli  is  a  favorite  piece  with  consumers 
of  gold  in  the  arts,  weighs  when  fresh  from  the  ]\Iint  21^  pennyweights. 
Pure  gold  is  considered  worth  81.04  a  per  ny weight.  As  the  standard 
of  the  double-eagle  is  21  6-10  carats  it  will  be  readily  seen,  by  a  calcula- 
tion, that  it  is  worth  $20.  That  is,  our  American  gold  coins  have  not 
the  sUghtest  fiat  element  in  them.  Wlien  new  they  are  worth  to  melt 
just  as  much  as  they  pass  for  as  money. 

Bullion  gold  is  not  readily  obtainable  m  Boston,  but  plenty  of  it  can 
be  got  m  New  York  city,  and  m  Newark,  both  of  which  places  consume 
vast  quantities  in  the  arts. 

The  term  carat,  of  wliich  I  have  made  use,  needs  a  Uttle  explanation. 
It  comes  from  a  Greek  word,  signifying  a  berry,  wliich  was  by  the 
Greeks  used  as  a  weight  of  four  grains;  and  in  this  country  and  in 
England,  when  carat  is  used  by  the  jewelers  to  express  weight,  it  stands 
for  fom*  grains.  In  Germany  and  France  it  varies  from  this.  But  the 
term  carat  is  more  fi-equently  used  as  above  to  express  the  purity  of 
coin  and  manufactured  articles  wliich  are  made  wholly  or  partly  of  gold. 
The  whole  mass  is  divided  into  twenty-four  parts  and  is  called  gold  of 
as  many  carats  as  it  contains  twenty -fourth  pai'ts  of  pure  gold.  Thus 
a  coin  of  which  twenty-two  twenty-fourths  is  pure  gold  is  called  twenty- 
two  carats. 

The  question  of  the  relative  value  of  gold  and  silver  is  one  that  greatly 
mterests  all  classes.  I  suppose  that  most  readers  are  perfectly  well 
aware  that  silver  has  been  steadily  falling  in  price  for  a  long  time. 
The  dollar  silver  coin,  wliich  is  current  in  this  country,  is  down  among 
the  seventies  on  the  world's  exchange.  The  reasons  for  this  decline  of 
silver,  or  this  relative  enhancement  of  the  value  of  gold,  are  many. 

Silver  has  fallen  in  value  because  the  demand  has  not  kept  pace 


THE    PAYING  -  TELLER   AND    HIS    CASH.  31 

with  the  production  while  gold  has  more  than  maintained  its  old-time 
position  because,  as  we  have  said,  the  demand  for  it  has  increased 
whUe  the  production  has  been  falling  off. 

Far  less  silver  is  used  than  formerly  in  art  and  in  mechanics. 

This  is  particularly  true  of  the  silver  situation  in  England.  Much 
less  silverware  is  now  made  and  sold  in  England  than  in  former  times. 
Business  depression  is  a  leading  cause  of  the  decrease  there  in  the  use 
of  silverware  in  families  ;  but  fashion  has  had  sometliing  to  do  with  the 
change.  Then  again  the  growing  custom  of  using  silver-plated  ware  in 
place  of  the  solid  article  exerts  a  great  influence.  The  popularity  of 
silver-plated  ware  has  been  increased  by  the  gi'eat  skill  and  thorough- 
ness shown  in  late  years  in  its  manufacture.  Many  good  housekeepers 
see  little  necessity  of  buying  solid  silverware  to  tempt  thieves,  when 
plated  silver  that  looks  as  well  can  be  obtained  so  cheaply.  On  the 
other  hand  there  has  been  a  steady  Increase  in  the  art  demand  for 
gold.  I  have  been  cognizant  of  a  grim  fact  (or  claimed  fact)  regarding 
the  art  demand  for  pure  gold,  that  has  not  attracted  very  wide  atten- 
tion. It  is  asserted  that  in  these  days  of  poor  teeth  the  average  adult 
has  at  least  a  dollar's  worth  of  gold  in  his  mouth,  and  that,  conse- 
quently, every  generation  buries  in  the  cemeteries  of  the  United  States 
$50,000,000  in  gold.  It  may  be  that  in  England  more  economy  is 
shown  than  here  in  the  disposition  of  dental  deposits,  for  I  have  seen 
in  London  stores  any  quantity  of  old  false  teeth  on  sale  for  the  gold 
that  was  fixed  in  them.  In  the  London  "Tunes"  it  is  very  common  to 
see  a  long  list  of  advertisements  of  second-hand  clotliing  and  second- 
hand false  teeth  for  sale. 

THE    TELLER'S    SPECIE. 

The  gold  m  our  banks  is  generally  in  charge  of  the  Paying-Tellers, 
and  lies  piled  in  bags  containing  §5,000  each.  Each  §5,000  weighs 
twenty-two  pounds.  Standard  gold  is  worth  §18. 96  an  ounce,  and  one 
reason  for  great  respect  for  this  noblest  of  all  the  noble  metals  comes 
from  the  fact  that  it  has  varied  but  a  trifle  in  price  since  the  discovery 
of  America  by  Columbus.  The  bags  of  gold  taken  on  by  the  Paying- 
Teller,  from  whatever  source  they  come,  are  by  him  invariably 
examined  and  weighed.  That  is,  it  must  be  pom-ed  from  the  bag 
which  holds  it  into  a  scale  and  poured  back  again  into  the  bag.  This 
is  done  for  two  reasons.  It  is  not  safe  to  take  on  gold  com  and  salt  it 
down  in  a  bank  vault,  without  making  a  face  to  face  examination  of  it 
to  see  if  it  is  the  genuine  article.  The  Teller  cannot  see  tlirough  a 
bag,  so  he  turns  out  its  contents,  and  thus  assures  himself  of  the 
quality  as  well  as  the  quantity  of  his  last  invoice  of  the  precious 
metal. 

In  the  days  of  the  State  bank  system  and  before  Clearuig-House 
methods  were  introduced  into  this  country,  in  one  of  the  large  New 
England  cities,  the  daily  settlements  of  debits  and  credits  between  the 
banks  were  made  in  gold  which  was  carried  from  bank  to  bank,  in 


32  PRACTICAL    BAXKIXG. 

§5,000  bags,  on  the  shoulders  of  the  messengers  of  the  period.  In 
tune  the  Tellers  grew  a  little  careless  in  their  manipulation  of  the  gold 
which  was  doing  this  balancing  duty  and  the  result  was  that  a  bag  filled 
with  old  copper  cents  gave  some  defavilting  Teller  a  good  profit  by 
doing  duty  as  gold  for  nobody  knew  how  long  until  it  was  finally 
brought  up  with  a  short  turn  by  a  Paying-Teller  who  took  time  to 
examine  the  inside  of  the  bag  as  well  as  the  tag  on  the  outside. 

Then,  bags  vary  in  weight,  but  it  must  be  only  a  slight  variation, 
and  if  on  weighing  a  $5,000  bag  of  gold  it  is  found  to  fall  short  in  weight 
one-half  of  one  per  cent. ,  the  Paying-Teller  mstitutes  a  search  for  the 
under  weight  corns  wliich  have  thrown  discredit  upon  the  whole  bag  by 
their  indi^'idual  deficiencies.  His  experienced  eye  at  once  detects  •the 
light  coins  which  almost  invariably  show  their  lightness  by  then*  worn 
and  smooth  appearance,  though  there  are  occasionally  instances  where 
clipped  coins  turn  up  to  account  for  the  default  in  the  bag.  If  they 
are  short  in  weight  from  sweating  or  clipping  they  are  retui-ned  as 
uncurrent  to  the  party  depositing  the  gold,  and  good  coin  taken  fi*om 
him  in  exchange.  If  the  bag  turning  up  short  is  the  property  of  the 
bank,  with  no  recourse  to  any  one  for  reclamation,  the  reduced  coins 
are  taken  to  specie  dealers  and  sold  for  the  melting  pot  for  the  most 
they  will  bring. 

When  a  short  weight  gold  coin  gets  by  chance  into  the  hands  of  the 
United  States  Treasurers  they  are  by  United  States  law  compelled  to 
stamp  it  short  upon  its  face,  and  thus  summarily  end  its  travels  as 
money. 

Clipping  of  coins,  of  which  we  have  spoken,  is  just  what  its  name 
would  indicate — the  simple  act  of  reducing  its  size  by  cutting  pieces 
out  of  it. 

There  is  a  process  for  debasing  gold  coin  which  is  more  difficult  of 
detection.  The  pieces  are  sometimes  si^lit  open,  gold  taken  fi'oui  the 
inside  of  both  pieces,  lead  or  some  other  heavy,  base  metal,  put  in  its 
place,  and  the  two  pieces  again  deftly  soldered  together.  The  sweatmg 
of  gold,  which  you  frequently  hear  mentioned,  is  a  very  ancient  mode 
of  cheating.  It  is  done  by  placing  the  gold  coins  in  a  strong  bag  and 
shaking  them  long  and  patiently.  I  have  heard  that  tliis  fraudulent 
operation  was  at  one  time  carried  on  by  the  aid  of  some  sort  of  a 
machine  for  shaking  the  bag.  One  not  acquainted  with  the  handling 
of  gold  coin  would  have  little  idea  how  easily  it  can  be  reduced,  and  its 
wearings  saved  by  the  process  I  have  described. 

The  natural  and  unavoidable  sweating  of  the  coin  resulting  from 
the  ordinary  and  legitimate  handling  of  the  bags  gives  one  a  very  good 
idea  of  the  artificial  sweating.  Thus  in  weighing  gold,  m  simply  pouring 
it  from  the  bag  and  pouring  it  back,  quite  an  amount  of  gold  dust 
can  be  detected  upon  the  bottom  of  the  scale  dish. 

My  Paying-Teller  had  occasion  recently  to  weigh  §50,000  in  gold; 
and,   after  weighing  it,    brought  to   me,   in   illustration  of  the  very 


THE    PAYIXG- TELLER    AND    HIS    CASH.  33 

point  of  which  I  am  writing,  quite  a  hand-covering  of  the  gold  dust, 
wliich  he  had  gathered  from  his  scale. 

This  point  of  the  wear  or  abrasion  of  gold  coin  is  a  most  interesting 
one.  Gold  can  neither  bo  handled  or  moved  without  more  or  less  loss 
from  this  cause  ;  and  in  handling  large  sums  it  becomes  a  very  appre- 
ciable item.  I  have  been  able  to  learn  of  a  few  cases  where  the  extent 
of  this  loss  was  by  the  circumstances  very  clearly  shown. 

Some  years  ago  the  gi-eat  banking-house  of  Brown  Brothers  &  Co,  ^ 
of  New  York  and  London,  shipped  from  Now  York  to  London  in  the 
usual  Avay  as  regards  handling,  packing  and  ocean  carriage  of  a  million 
of  dollars  of  gold  in  coin.  By  one  of  those  sudden  swings  in  the  current 
of  exchange  between  Erigland  and  America,  which  are  not  infrequenty 
it  was  found,  before  the  gold  had  crossed  the  Atlantic,  that  the  most 
profitable  exchange  use  of  that  §1, 000, 000  in  gold  could  be  made  by  order- 
ing it  returned  to  New  York  at  once  in  unbroken  bulk — in  its  original 
unopened  boxes.  The  steamer  that  boi*e  it  to  London  was  met  by  a 
cablegram  that  had  passed  it  on  its  way,  ordering  the  immediate 
reshipment  of  the  gold  to  New  York — which  was  promptly  done,  and 
back  it  came  to  Wall  street  in  the  original  packages. 

The  net  loss  to  the  New  York  house  from  the  abrasion  resulting  from 
the  round  trip  was  l-57th  of  one  per  cent — just  §175. 

A  great  New  York  shipper  of  gold,  who  has  had  these  figures  wliich 
I  have  just  given  under  his  consideration,  tells  me  that  his  experience 
(a  long  one)  in  shipping  gold  to  and  from  London  has  taught  him  to 
expect  an  ocean  voyage  abrasion  loss  of  about  $186  on  every  million. 
But  there  is  a  difference  of  opinion  among  our  gold  shippers  regarding 
this  matter. 

Our  Paying-Teller,  however,  knows  that  gold  is  so  easily  worn  and 
defaced  that  it  is  very  judicious  to  handle  it  carefully  and  in  the  right 
way.  When  put  in  these  $5,000  bags,  which  I  have  described,  it  must 
not  be  tied  too  closely.  Space  must  be  left  between  the  string  and  tho 
gold  so  that  the  coins  may  have  a  chance  to  swim  around  loosely  when- 
ever the  bag  is  moved.  If  tied  closely  the  coins  will  cut  and  wear  each 
other  and  also  strain  harder  upon  the  bag.  The  simple  tying  of  a  bag 
of  gold  is  an  art.  They  are  to  be  opened  whenever  they  pass  into  new 
hands,  and  Paying-Tellers  look  for  a  peculiar,  handy  knot  in  the  string, 
wliich  can  be  easily  untied  Avithout  cutthig,  and  the  absence  of  such 
assures  them  that  some  green  hand  has  last  had  the  bag.  I  have  heard 
an  experienced  Paying-Teller  say  he  should  like  to  go  up  and  do^\^l 
among  the  banks  telling  bank  officers  how  to  bag  gold,  inexperienced 
ones  having  caused  him  so  much  trouble. 

In  some  banks  it  falls  to  the  lot  of  the  Teller  to  make  up  parcels  of 
gold  for  sliipment  to  foreign  countries.  In  sliipping  gold  coin  to 
England  the  shipper  generally  sends  American  double-eagles.  He 
selects  these  because,  being  a  lai'ge  coin,  there  is  less  shrhikage  on 
them.     If  they  cannot  be  procured  he  takes  the  next  best  thing,  which 


34  PRACTICAL,   BANKING. 

is  the  ten  dollar  gold  jiiece.  These  he  generally  packs  in  rather  small 
size  boxes  made  ol  very  thick  pine  boards.  Sometimes  the  coin  is  put 
into  kegs  about  the  size  of  nail  kegs.  In  both  cases  the  packages  are 
sealed. 

The  experienced  shipper  has  a  very  neat  way  of  sealing  his  boxes 
wliich  is  wortli  remembering.  He  sinks  the  heads  of  the  large  screws 
well  down  in  the  boxes  and  then  covers  them  Avith  his  seal  of  wax. 

When  put  on  board  ship  specie  is  generally  placed  in  the  run  of  the 
vessel,  and  large  shippers  of  gold  have  told  me  that  special  care  is 
sometimes  taken  to  keep  from  those  on  board  the  sliip  the  fact  that 
specie  forms  a  part  of  the  cargo.  But  the  pursers  of  our  steamers 
must  know  all  about  such  matters,  and  it  is  now  the  custom  of  the 
papers  to  report  in  detail  all  the  movements  of  specie  between  this  and 
other  countries. 

When  the  American  coins  reach  the  other  side  they  find  themselves 
situated  pretty  much  as  is  the  English  sovereign — the  one  pound  value 
coin  of  England — when  it  comes  to  see  us.  They  know  nothuig  of 
dollars  and  cents  in  England.  We  do  not  count  in  pounds,  sliiUuigs 
and  pence  here.  Either  comage  is  uncurrent  when  away  from  home, 
and  becomes  simply  merchandise.  Here,  uncuiTent  coin  is  taken  in 
charge  by  dealers  m  the  article,  who  sell  it  to  manufacturing  jewelers 
for  the  melting  pot,  to  travelers  who  are  going  to  countries  where  such 
coins  are  current,  or  to  the  Mints  of  the  United  States,  where  it  is  recast 
into  current  American  coin.  The  com  and  bulUon  we  shij>  to  England 
is  treated  in  the  same  manner,  except  that  the  Bank  of  England  and 
not  the  Enghsli  Government  has  the  monopoly  of  the  coining  and 
recoining  of  the  Kingdom. 

If  it  is  asked  why  our  sliipf>ers  of  gold  to  Europe  do  not  send  bullion 
rather  than  American  coined  gold  I  i-eply  that  bulUon  of  this  sort  is 
one  of  the  most  difficult  things  to  find.  "In  fact,"  said  a  lai'ge shipper 
of  gold  to  me,   "when  we  want  it  it  seems  impossible  to  get  it." 

In  shipping  gold  from  England  to  this  country  the  shipper  also 
himts  for  American  double-eagles  ;  but  he  fhids  few  for  the  reason,  as 
I  have  stated,  that  they  are  apt  to  be  recoined  as  soon  as  they  get 
there.  But  bullion  gold  he  can  get.  The  Bank  of  England  has  vast 
stocks  of  it  from  which  are  di-awn  the  sliipments  of  gold  that  England 
makes  to  all  parts  of  the  world. 

The  Paymg-Teller  is  sometimes  called  upon  to  pay  out  silver  com 
for  shipment.  But  most  of  the  silver  that  has  been  sent  out  of  tliis 
country  of  late  years  has  gone  out  in  the  shape  of  silver  bricks."  Once 
in  a  while  silver  coins  are  called  for  to  sliip  to  China  to  pay  for  teas  and 
other  commodities. 

A  gentleman  once  left  Boston  in  a  sliip  bound  for  CliLna  with 
$18,000  in  silver  dollars  in  a  few  nail  kegs  wliich  he  kept  with  him  in 
liis  berth  all  the  long  and  tedious  voyage. 

The  Chinese  will  have  nothing  but  silvei-.     Ai\d  they  are  very  par- 


THE    PAYING  -  TELLER    AXD    HIS    CASH. 


35 


tieular  what  sort  of  silver  that  is.  At  one  time  they  would  take  nothing 
but  the  Mexican  dollar.  It  is  still  very  popular  there.  Our  trade  dollar 
was  prepared  to  suit  their  taste.  They  possess  wonderful  skill  in  judging 
the  merits  of  a  coin.  They  have  professional  coin  testers  who  will  pass 
a  keg  of  silver  dollars  tlirough  their  hands  with  amazing  rapidity, 
rejecting  by  the  mere  sense  of  touch  the  light  weight  or  debased  dollars. 
At  home,  our  Paying-Teller  may  find  before  him  counterfeit  coins, 
especially  of  silver,  that  are  really  more  handsome  than  the  genuine. 

Here  is  the  United  States  Mint  test  for  determining  whether  gold 
and  silver  coin  is  good  or  bad.  Use  the  hquids  as  near  the  edge  of 
suspected  coin  as  possible,  that  being  the  part  most  worn.  A  drop  of 
the  preparation  will  have  no  effect  on  genuine  coin,  while  its  action 
can  be  plainly  seen  on  the  counterfeit.  Heavily  plated  coin  should  be 
scraped  shghtly  before  using  : 

Test  for  Gold.  —  Strong  Nitric  Acid  (368),  39  parts.  Muriatic  Acid,  1  part. 
Water,  20  parts. 

Test  for  Silver.— 34  grains  Nitrate  of  Silver.  30  drops  Nitric  Acid.  1  ounce 
Water. 

Here  is  a  table  of  the  standard  weights  of  United  States  gold  and 

silver  coins  : 

STANDARD  WEIGHT  OF  UNITED  STATES  GOLD  COIN  (BY  ACT  OF  CONGBESS, 
PASSED  JUNE,  1854,)  AND  SILVER  COIN  (BY  ACT  OF  CONGRESS,  PASSED  1878). 


Gold. 

Silver. 

Dollars. 

Ounces. 

Peiiny- 
weights. 

Grains. 

Total 
Penny - 
weights. 

Grains. 

Dollars. 

Penny- 
weights. 

Grains. 

1 

1 

5 

10 

16 

26 

53 

107 

161 

268 

537 

1075 

2687 

1 
2 
3 
5 
10 
1 

13 
7 

15 
2 
17 
15 
10 
5 
15 
10 

10 

1.8 
16.5 

5.4 

9 
18 
12 
18 
12 

12 
12 

1 

2 

3 

5 

10 

21 

53 

10- 

215 

322 

537 

1,075 

2,150 

3,225 

5,375 

10,750 

21,500 

53,750 

1.8 
16.5 

5.4 

9 
18 
12 
18 
12 

12 
13 

1 

5 

1    10 

20 

50 

100 

200 

500 

17 

85 

171 

343 

859 

1718 

3437 

8593 

21 
18 
9 
18 
13 
18 

25^ 

3 

5 

10 

20 

50 

100 

200  

300 

500 

1,000 

2,000 

3,000 

5,000 

10,000 

20,000 

50,000 

I  add  also  a  few  words  regarding  some  unjust  coin  rules  which  have 
been  set  up  by  the  United  States  Treasury. 

Briefly  stated  they  are  these  :  If  a  standard  gold  coin,  in  currency 
sound,  falls  short  one-half  of  one  per  cent,  of  its  original  standard 
weight,  it  is  marked  hght  weight  the  moment  it  reaches  the  United 
States  Treasurer  or  any  of  liis  Sub-Treasurers.    Having  thus  condemned 


36  PRACTICAL,    BAXKIXG. 

it  and  by  the  stamp  robbed  it  of  its  power  to  travel  more  as  money  the 
Treasury  refuses  to  redeem  it  at  all  and  thus  turns  it  into  simple 
merchantable  gold.  In  this  shape  the  holder  finds  that  he  must  lose 
about  three  per  cent,  on  it,  that  being  the  discount  he  must  allow  to 
the  brokers  who  buy  it  to  sell  again  to  be  used  in  the  arts. 

Silver  coins  which  have  been  cUpped  and  bored  are  placed  at  a 
disadvantage  by  the  United  States  Treasuiy  m  the  same  way.  It  will 
not  pay  for  them  theii*  proportional  value  viewed  as  money  coins.  It 
condemns  and  drives  them  to  the  melting  pot. 

In  view  of  these  facts,  bankers,  business  men  and  others  have 
petitioned  the  Secretary  of  the  Treasury  as  follows  : 

That  your  petitioners,  represontiug  tlio  banking-  and  tinancial  interests  in  this 
locality,  desire  to  call  your  attention  to  the  inadequate  means  i)rovided  for  exchang- 
ing mutilated  gold  and  silver,  and  would  respectfully  suggest  that,  in  view  of  the 
large  amount  of  profit  accruing  to  the  Government  l)y  the  coinage  of  silver,  liberal 
regulations  be  made  for  the  redemption  by  the  Treasury  of  all  gold  and  silver  coins 
reduced  in  weight  below  the  limit  allowed  by  law. 

If  j'ou  would  instruct  the  various  Assistant-Treasurers  to  receive  all  light  weight 
gold  coin  and  all  mutilated  silver  coin,  deducting  from  the  face  value  of  the  gold  coin 
presented  live  cents  for  every  grain  or  fraction  of  a  grain  that  was  missing,  and  from 
silver  five  cents  for  every  pennyweight  missing,  and  atithorize  them  to  receive  these 
light  weight  and  mutilated  coins  in  whatever  sums  offered,  in  a  few  months  this  class 
of  coin  would  entirely  disappear. 

It  is  not  fair  to  compel  the  public  to  lose  the  difference  between  the  actual  and 
nominal  value  of  silver,  and,  as  over  $9,0^'0,0(iO  was  curried  to  the  credit  of  the  silver 
profit  fund  during  the  last  fiscal  year  (1889),  we  think  the  Treasury  can  afford  to  be 
liberal  in  providing  a  fair  means  for  exchanging  and  redeeming  these  coins. 

UNITED    STATES    TREASURY    NOTES. 

These  are  knowTi  to  bankers  and  to  business  men  generally  under 
several  popular  names,  none  of  which  fit  them  well.  There  is  no 
particular  propriety  in  labehng  them  legal-tenders,  par  excellence,  since 
they  are  so  no  more  than  any  other  class  of  lawful  United  States 
money.  Neither  do  they  seem  particularly  entitled  to  the  name  of 
greenbacks,  their  war-time  popular  nick-name,  smce  their  backs  are 
not  much  greener  in  their  hue  than  the  National  bank  bills  of  all  the 
earlier  issues.  But  there  is  one  name  which  bankers  are  fond  of 
bestowing  upon  them,  Avhich  is  decidedly  uicoiTCct,  and  that  is  that 
of  United  States  demand  notes.  It  is  a  pecuhar  fact,  and  one  that 
few  holders  of  these  notes  have  observed,  that,  unlike  National  bank 
or  old  State  bank  issues — in  fact  unhke  all  other  paper  money  afloat  in 
this  country  or  abroad — they  are  actually  not  even  payable  on  demand. 
These  promises  to  pay,  issued  by  a  Government  wliich  was  at  the  time 
of  their  issue  m  a  great  strait,  simply  read  "  United  States  Avill  pay  to 
bearer ;"  and  this  omission  to  say  more — to  mention  the  time  when  they 
would  be  paid — was  without  doubt  more  than  accident.  Other  paper 
money  of  all  lands  reads  "Will  pay  bearer  on  demand."  There  are 
about  $346,000,000  in  these  notes  now  m  circulation  under  legal-tender 
enactments  which  have  never  been  repealed.  Their  denominations 
are  §1,  $2,  $5,  §10,  820,  $50,  §100,  §500,  §1,000. 

The  silver  option,   which  the   Government  holds,   is  what  L-acls 


THE    PAYING -TELLEK    AXl)    HIS    CASH.  37 

London  to  quote  our  Treasury  notes  at  eighty-five  cents,  and  bankers 
and  others  in  New  York  and  Boston  to  hoard  gold  whenever  a  panic 
comes  or  is  threatened. 

Treasury  notes  are  now  redeemed  by  the  United  States  Treasurer 
and  his  Sub-Treasurers  in  specie,  but  not  necessarily  in  gold. 

Our  Treasury  notes  are  lawful  money  m  every  capacity  in  the 
United  States ;  yet  in  international  exchanges — in  the  world's  commerce 
— they  are  short  of  it  by  the  world's  difference  in  quotations  of  gold  and 
silver.  And  so  they  will  remain  till  they  are  made  redeemable  in  gold 
or  the  world  of  exchange  adopts  a  bi-metallic  standard. 

NATIONAL  BANK  NOTES. 

They  are  promissory  notes,  payable  on  demand.  They  are  in  the 
law  issued  by  a  private  corporation,  for  a  National  bank,  though 
seemingly  a  public  institution  in  many  of  its  aspects,  is  nothing  more 
or  less  than  a  private  corporation.  National  bank  notes  are  not  lawful 
money.  They  are  not  legal-tender  between  man  and  man,  yet  they  are 
between  individuals  and  National  banks,  for  National  banks  are  obliged 
to  receive  them  for  debts  due.  All  National  banks  are  obliged  to  receive 
them  from  all  other  National  banks  in  settlement  of  debts.  Their 
denominations  are  §5,  §10,  §20,  §50,  $100,  §500  and  §1,000.  The  issue  of 
National  bank  bills  of  less  than  §5  was  stopped  when  specie  (or  silver) 
payment  was  set  up. 

The  National  bank  bill  is  redeemable  at  a  central  bureau  in 
Washington — and  over  the  counter  6f  the  issuing  bank — in  lawful  money 
(Treasury  notes,  gold  and  Bland  dollars) ;  then*  market  value  is  therefore 
the  same  as  the  legal-tender  Treasury  note.  They  are  receivable 
at  par  in  all  parts  of  the  United  States  for  taxes,  excise,  pubhc  lands, 
and  all  other  debts  due  to  the  United  States  except  duties  on  unports, 
and  also  for  all  salaries  and  other  debts  and  demands  owing  by  the 
United  States  to  individuals,  corporations  and  associations  within  the 
United  States,  except  interest  on  the  public  debt  and  redemption  of  the 
National  currency. 

The  arrangements,  which  the  National  banks  in  Clearing-House  cities 
make  among  themselves  by  wliich,  under  a  Clearing-House  plan  for 
which  no  special  provisions  are  made  in  the  Revised  Statutes  of  the 
United  States,  they  bind  themselves  to  make  their  mutual  settlements 
in  lawful  money,  are  elsewhere  fully  explained.  In  places  where  there 
are  no  Clearing-House  arrangements,  and  no  mutual  plans,  like  a  wheel 
withm  a  wheel,  for  governing  the  banks  in  their  dealings  among 
themselves,  they  pay  and  receive  from  each  other  National  bank  bills 
(as  the  law  directs)  in  the  settlement  of  all  their  transactions. 

National  bank  notes  are  divided  into  tlu*ee  classes,  as  follows  :  1. 
The  old  series  bearing  the  small  star-pointed  seal,  and  signed  by  F.  E. 
Spinner  as  Treasurer.  2.  The  series  of  1875,  bearing  the  scalloped  seal, 
and  signed  by  John  C.  New,  A.  U.  Wyman  or  James  Gilfillan  as 
Treasurer.      3.    The   series  of  1882,  boar;n'?  the  large  seal  (chocolate 


38  PRACTICAL  BAXKIXG. 

color),  and  signed  by  James  Gilfillan  or  A.  U.  Wyiuan  as  Treasurer 
of  the  United  States. 

Let  me  stop  right  here  and  figure  out  the  coin  standing  of  National 
bank  notes.  They  are  secured  by,  and  issued  upon.  United  States 
bonds — and  well  secured,  because  there  are,  estimated  at  par,  6100  in 
United  States  bonds  behind  every  ninety  dollars  of  the  National  notes 
outstanding. 

Every  National  bank  must  keep  itself  in  funds,  at  the  redemption 
bureau  in  "Washington,  to  redeem  its  notes  in  full  whenever  they  turn 
up  there  ;  and  every  National  bank  must  also  hold  itself  in  readiness 
to  redeem  its  circulating  notes  over  its  own  counter. 

But  what  sort  .of  a  redemption  is  this  ?  That  is  what  we  want  to  get 
at.  Wliat  are  the  notes  to  be  redeemed  with  ?  Wliy,  in  lawful  money, 
of  course,  for  that  is  what  the  law  specifically  demands.  And  what  is 
lawful  money  in  the  United  States  ?  That  is  a  question  easily  answered, 
for  the  answer  is  all  down  in  the  law.  Lawful  money  is  legal-tenders, 
gold  and  silver  dollars  to  any  amount,  and  fractional  silver  to  the  extent 
of  five  dollars.  So  I  have  reached  the  bottom  of  the  National  bank 
note.  I  find  it  a  silver  bottom.  Every  dollar  of  the  outstanding 
National  bank  notes  can  be  lawfully  redeemed  in  silver.  Now  this  silver 
fact  is  of  little  conseqence  just  at  this  moment,  because  gold  is  not  at  a 
premium.  But  the  moment  gold  does  touch  a  premium,  this  silver 
option  on  the  legal-tenders  and  National  notes  will  be  a  very  disturbing 
currency  element. 

And  now  I  face  the  main  question.  Is  gold  going  to  a  premium  ? 
That  is  what  every  one  is  asking.  That  is  what  no  one  can  answer. 
"It  all  depends."  If  we  keep  our  exchange  current  all  solid  with  the 
other  side,  gold  will  not  touch  a  premium.  If  this  great  coiuitry  will 
continue  to  send  to  Europe  more  of  its  wheat,  corn,  etc. ,  than  it  imports 
from  there  in  silks,  satins — all  that  long  line  of  European  products 
that  are  to-day  pouring  in  upon  us  by  every  steamer — and,  alas, 
pouring  in  just  now  at  a  time  when  we  are  holding  our  wheat  too  high  to 
compete  with  Russia,  India,  etc. — and  if  investors  on  the  other  side 
begin  to  lose  confidence  in  our  shares  and  bonds — why  then  we  shall 
be  in  a  bad  exchange  rut,  and  gold  will  flow  out  from  us  and  advance 
to  a  premium. 

But  I  think  theorists  are  becoming  too  much  alarmed  over  the  gold 
and  silver  situation.  I  see  no  prospect  of  a  character  to  cause  innnediate 
worry.  This  great,  strong  country  is  coming  out  all  right.  It  has  the 
ability  to  feed  and  clothe  Europe,  and  its  greatest  city,  New  York,  is 
soon  to  become  the  financial  heart  of  the  world. 

SILVER  CERTIFICATES. 

These  youngest  of  all  the  Treasury  issues  have  come  to  be  about  as 

familiar  an  object  in  the  cash  drawers  of  the  Tellers  of  our  National 

banks  as  the  common  Treasury  notes  or  National  bank  bills.     They 

count  in  the  reserve  of  a  National  bank,  and  must  be  received  by  all 


THE    PAYING  -  TELLER   AND    HIS    CASH.  39 

National  banks  for  debts  due.  No  National  bank  can  be  a  member  of 
any  Cleaiing-House  Association  in  which  silver  certificates  are  not 
received  m  the  settlement  of  Clearing-House  balances.  They  cannot 
be  taken  by  National  banks  as  security  for  loans,  and  it  is  unlawful 
to  withhold  thcni  from  circulation — to  lock  them  up.  These  silver 
vouchers  are  issued  under  an  Act  of  Congress  of  February  28, 1878,  and 
all  read  payable  on  demand  to  bearer  in  silver  dollars  at  the  oflBce  of 
the  Treasurer  of  the  United  States  in  Wasliington,  this  silver  dollar 
being  the  standard  dollar,  of  unlimited  legal-tender  capacity,  weighing 
412.5  grains,  and  of  wliich  there  are  now  about  300,000,000  in  circulation. 
The  silver  certificate  is  not  itself  a  legal-tender,  but  it  is  so  near  being 
so,  from  the  fact  that  it  can  be  taken  to  the  nearest  Sub-Treasury  and 
exchanged  on  demand  for  dollars  that  are  legal-tender,  that  it 
practically  does  legal-tender  work  in  our  currency. 

They  are  always  signed  in  fac-simile  by  the  register  of  the  Treasury 
and  the  United  States  Treasurer. 

MUTILATED,  AND  COUNTERFEIT  PAPER  MONEY. 

Paper  money,  the  world  over,  is  all  the  time  sinking  into  a  mutilated 
and  filthy  condition.  How  to  keep  it  m  presentable  shape,  and  at  the 
same  time  keep  it  moving,  is  one  of  the  hard  eonvmdrums  of  the  day. 
In  the  United  States,  and  in  Europe,  immense  pains  are  taken  to  pro- 
cure for  monetary  use  the  strongest  and  most  perfect  paper.  There 
has  never  been  a  time  when  such  excellent  paper  has  been  used  for 
paper  money  as  is  now  used.  But,  along  with  the  production  of  strong 
and  fine  paper  money,  has  come  a  custom  of  handling  it  in  the  most 
careless  and  slovenly  manner.  It  was  not  thus  in  the  days  of  our 
grandfathers.  They  carried  great  calf -skin  wallets,  and  in  them  care- 
fully laid,  at  full  length,  their  money  bills.  Now-a-days  we  wad 
the  bank  notes  and  greenbacks  in  pinched  porte-monnaies.  We  crush 
them  in  a  heap,  and  jam  them  into  trousers  and  vest  pockets,  along- 
side of  keys  and  jack-knives.  In  fact,  as  a  general  thing,  we  use  them 
carelessly  and  roughly.  We  know  we  shall  not  keep  them  long.  We 
seem  to  care  only  to  keep  them  in  a  condition  that  will  ensure  them  a 
shape  to  pass  to  the  next  person.  Let  me  suggest  that  as  the  com- 
munity in  general  is  much  given  to  denmieiation  of  the  worn  and  filthy 
condition  of  the  National  bank  and  legal-tender  circulation,  it  would 
greatly  mend  matters  if  it  should  at  once  begin  to  do  what  it  can  to 
keep  our  paper  money  smooth  and  clean,  by  handhng  it  every  time 
just  as  if  it  was  made  of  a  delicate  and  perishable  material,  instead  of 
treating  it  as  it  now  too  often  does,  as  if  bills  were  made  of  India  rubber 
or  leather. 

Once  in  a  while  a  bank  bill  of  old  date  comes  into  our  hands  that 
shows  careful  usage  and  remarkable  preservation. 

Fifty  years  ago  the  wife  of  a  wealthy  and  liberal  city  merchant  sent 
her  minister's  wife  in  a  letter  a  present  of  a  fifty  dollar  bank  bUl. 
All  the  parties  to  the  transaction  died  long  ago.     A  while  since  the 


40  PRACTICAL    BANKING. 

fifty  dollar  bank  bill  was  discovered  in  the  very  same  old  letter  in 
wliicli  it  was  sent  to  the  minister's  wife — found  among  her  books  and 
private  papers.  It  came  into  my  hands  as  smooth  and  bright  as  when 
first  issued,  and  I  redeemed  it.  She  certainly  had  taken  good  care  of 
the  original  gift,  though  we  cannot  say  much  for  the  way  she  had 
looked  after  the  interest  account. 

The  Paying-Teller  can  do  his  part  of  the  good  work  if  he  will  make 
a  point  of  keeping  in  stock  as  nice,  new  and  bright  an  assortment  of 
bills,  large  and  small,  and  gold  and  silver  coin  of  the  current  denomin- 
ations as  it  is  within  his  j^ower  to  secure.  I  am  now  referring,  of  course, 
to  the  supply  of  miscellaneous  cash  he  cai-ries  in  his  trunks  and  drawers 
to  meet  what  may  be  termed  the  demand  of  the  retail  branch  of  liis 
trade — to  cash  the  checks,  which  are  generally  small  checks,  to  meet 
personal  wants,  that  are  paid  over  his  counter.  I  happen  to  know  the 
Paying-Teller  of  a  large  bank,  whose  general  management  is  a  model 
of  system,  and  who  shows  his  views  of  neatness  and  order  in  his  busi- 
ness by  fully  carrying  out  this  idea.  His  customers  often  speak  with 
satisfaction  of  the  fact  that  their  Paying-Teller  always  manages  to  pay 
them  in  clean  and  unmutOated  bills  and  change,  even  down  to  cents, 
that  is  fresh  and  bright.  With  a  little  pains,  particularly  in  our  large 
places,  Paying-Tellers  may  make  a  marked  improvement  in  this  respect. 
New  small  bills,  silver  and  cents,  may,  with  very  little  expense,  be 
obtained  for  old  ones  at  the  United  States  Treasury. 

But  let  the  National  bank  notes  and  legal-tenders  be  used  as  care- 
fully as  possible,  they  will  still  wear  out;  they  are  made  of  light 
weight  and  of  perishable  materials. 

Every  person  will  at  times  find  on  his  hands  worn,  filthy  and  mutil- 
ated notes.  Now  what  is  the  precise  status  of  such?  What  are  the 
rules  of  the  banks  and  the  bankmg  department  in  redeeming  notes 
that  are  evidently  unfit  for  circulation? 

If  the  whole  face  of  the  note  is  present  and  in  a  condition  to  permit 
of  the  recognition  of  its  parentage,  it  will  be  promptly  redeemed  at  full 
face  value,  no  matter  how  dirty,  Avorn  and  defaced  it  may  be.  It  is 
not  even  necessary  that  the  signatures  of  the  President  and  Cashier 
shall  be  decipherable  upon  them.  If  every  signature,  written  or 
engraved,  that  had  originally  stood  upon  the  note  had  been  washed  or 
worn  off  the  bill  would  yet  be  redeemed. 

But,  if  portions  of  the  paper  itself  are  missing,  the  Government  is 
very  particular  in  its  treatment  of  them. 

What  its  precise  rules  are  in  these  premises  we  will  here  set  down,  so 
that  every  body  handling  fragmentary  bills  shall  know  their  rights  in 
this  redemption  business. 

If  not  moi-e  than  two-fifths  of  the  paper  is  gone,  and  the  note  shows 
the  name  of  the  bank,  and  the  signature  of  one  of  its  officers,  it  will  be 
redeemed  at  full  value. 

A  fragment  of  a  National  bank  note,  which  does  not  clearly  amount 


THE    PAYIXG  -  TELLER    AND    HIS    CASH.  ^  41 

to  two-fifths  of  the  original  paper,  is  not  redeemable  at  all,  either  by 
the  banks  or  the  redeeming  bureau  at  Washington,  unless  a  satisfactory 
affidavit  can  be  presented,  showing  tliat  tlie  balance  of  the  note  has 
been  destroyed.     In  this  ease  the  bill  will  be  redeemed  in  full. 

Where  a  fragmentary  note  amounts  to  two-fifths  or  more,  ar  d  not 
over  three-fifths,  the  National  banks  redeem  it  at  its  proportional  value, 
or,  rather,  at  as  near  its  proportional  value  as  they  can,  and  still  be  in 
harmony  with  the  Government  rule  that  the  valuation  of  the  fragments 
shall  be  equal  to  the  face  value  of  some  denomination  issued  by  the 
bank,  or  some  multiple  thereof. 

In  a  word,  all  fragments  of  bills  of  two-fifths  and  over  and  less  than 
three-fifths  are  redeemed  by  the  National  banks  at  proportional  value 
as  near  as  it  can  be  got  at  by  a  payment  that  is  a  multiple  of  a  dollar, 
or  is  of  the  amount  of  some  denomination  issued  by  the  bank. 

When  a  National  bank  has  redeemed  a  lot  of  fragments  of  its  own 
issue  under  these  rules,  it  makes  up  the  parcel  of  pieces  into  pieced 
bdls.  This  it  does  by  putting  the  fragments  together,  without  regard 
to  the  denominations,  reckoning  the  value  of  the  pieces  by  the  amount 
paid  for  them,  and  making  up  new  bills  equal  to  the  face  value  of 
some  denomination  issued  by  the  bank. 

The  fi-agmentary  valuation  laws  applicable  to  United  States  notes, 
legal-tendei's,  are  not  like  those  I  have  just  described  as  belonging  to 
fragmentary  National  bank  notes. 

Fractional  legal-tenders  equalling  or  exceeding  three-fifths  of  original 
proportions  are  redeemed  by  the  United  States  and  its  Assistant 
Treasurers  on  a  scale  by  tenths  as  below. 

When  less  than  three-fifths  remam,  and  not  less  than  clearly  one- 
half,  they  will  be  redeemed  only  by  the  Treasurer  at  Washington  at 
just  one-half  full  face  value  of  the  note. 

Fragments  less  than  one-half  are  only  redeemed  when  an  affidavit 
is  shown,  proving  that  the  vpst  has  been  destroyed. 

The  circular  of  the  United  States  Treasury  gives  the  rule  thus : 

"  United  States  Notes,  Gold  Certificates  and  Silver  Certificates  are  redeemable,  by 
the  Treasurer  oulj-,  when  mutilated  to  the  extent  of  one-tenth,  but  not  two-tenths, 
at  niuc-tenths  of  their  face  value  ;  two-tenths,  but  not  three-tenths,  at  eight-tenths 
of  their  face  value ;  three-tenths,  but  not  four-tenths,  at  seven-tenths  of  their  face 
value ;  four-tenths,  but  not  one-half,  at  six-tenths  of  their  face  value.  Fragments 
of  notes,  each  constituting  clearly  one-half,  are  redeemable  at  one-half  the  full  face 
value  of  such  whole  notes." 

The  old  Treasury  notes — issues  prior  to  1869 — were  made  of  plain 
bank-note  paper.  The  issues  of  a  later  date  have  been  printed  on  fibre 
paper.  Of  the  old  issues  counterfeits  were  more  numerous  than  those 
of  the  new,  though  some  dangerous  counterfeits  of  the  latter  have  been 
made.  By  exercising  caution,  however,  in  handling,  bank  Tellers 
need  never  be  deceived  by  taking  counterfeit  bills.  The  Secret  Service 
Bureau  of  the  Treasury  Department  is  now  managed  with  such  skill 
that  advice  of  any  new  attempts  to  float  ' '  crooked  "  money  is  furnished 
to  the  bankers  before  the  counterfeiters'  plans  can  be  put  in  operation. 


43 


PRACTICAL    BAN^KING. 


This  advice  is  sent  out  to  the  banks  through  the  several  banking 
journals  as  promptly  as  received  from  the  Chief  of  the  Secret  Service 
Bureau.  As  a  rule  the  so-called  **  Counterfeit  Detectors  "  are  useless 
and  misleading.  If  bank  Tellers  will  make  a  careful  study  of  genuine 
bills  and  use  the  information  above  referred  to  they  need  never  be 
deceived. 

On  page  43  is  a  copy  of  the  measuring  scale  which  the  Treasury 
department  supplies  to  the  National  banks  for  use  in  handlmg  mutilated 
notes  of  the  class  named . 

All  United  States  notes  are  printed  m  sheets  of  four  notes  of  one 
denomination  on  each  sheet.  Each  note  is  lettered  in  their  respective 
order  in  the  upper  and  lower  coi-ners  diagonally  oppsite,  A,  B^  C,  D. 
The  Government  system  of  numbering  its  notes  results  in  a  certain 
relation  between  the  munher  and  the  letter  of  each  note ;  thus  all  notes 
of  which  the  number  when  divided  by  4  shows  a  remainder  of  1  have 
the  check  letter  A ;  2  remainder,  B ;  3  remainder,  C  ;  those  numbers  with 
no  remainder,  are  lettered  D.  Any  United  States  note  upon  which 
the  number  cannot  he  divided  by  4  and  show  the  above  result  is  a 
counterfeit. 

TABLE   OF  COUNTERFEIT  UNITED   STATES    TREASURY   NOTES. 


All  genuine  Notes 
prior  to  1809  were 
printed     on    plain 
bank  -  note   paper. 
Since  1869  on  fibre 
paper. 

Portrait. 

1862,  Chase. 

1875,  Washington. 

Portrait. 
186i,  Hamilton. 
1875,  Jefferson. 

,      Portrait. 
1862-3,  Hamilton. 
1875,  Jackson. 

Portrait. 
1862-:t,  Lincoln. 
1875,  Webster. 

Vignette. 
1862-3,  Liberty. 

Portrait. 
1875-8,  Hamilton. 

Portrait. 

1862-3,  Hamilton. 

186;),  Clay. 

Vignette. 

18(i2, 

Spread  Eagle. 

Portrait. 

186!), 
Adams. 

Is 

$1 

$2 

$5 

$io 

$20 

$60 

$100   $500 

1 

$iooo 

o 

w 

1862. 

B 
C   D 

B 
C  D 

A 

A 
D 

B 
C 

A      B 
C 

B 
C         C 

A  B 
D 

1863. 

ABA 
C   D 

A  B 

C  D| 

A  B 
D 

1869. 

B 

B 
C 

O 

M 

02 

1875. 

D 

D 

A 
C  D 

C 

A      B 
C      D 

D 

1878. 

A      B 
C      D 

1880. 

D 

All  the  different  series  of  the  National  bank  notes  have  been  coun- 
terfeited  from  time  to  time. 

We  have  seen  published  for  the  use  of  the  banks  an  authorized  list 
of  all  National  bank  bills  which  have  been  counterfeited  so  arranged 
as  to  show  in  each  case  both  the  Government  number  and  the  bank 
number  of  all  bills  of  that  denomination  issued  to  that  bank,  and  giving 
simple  rules  by  which  to  infallibly  decide  by  these  numbers  whether  a 


THE   PAYING  -  TELLER   AND   HIS   CASH. 


48 


• 

44  PRACTICAL   BAXKIXG. 

given  bill  was  good  or  counterfeit.  All  National  bank  notes  issued 
prior  to  the  series  of  1875  bear  the  signature  of  F.  E.  Spiimer  as 
Treasurer.  All  National  bank  notes  issued  since  1875  bear  the  signature 
of  Jolm  C.  New,  James  Gilfillan  or  A.  U.  Wyman  as  Treasurer. 

Photography  has  not  been  successfully  used  either  in  counterfeiting 
National  bank  notes  or  United  States  Treasury  notes,  as  the  colors  on 
these  notes  cannot  be  reproduced  by  photogi-aphy. 

Of  a  more  artistic  nature  than  the  use  of  lists,  and  requiring  more 
skill  is  the  detectioii  of  bad  money  by  judging  of  the  character  of  the 
engraving  and  printing. 

I  recollect  that  on  one  occasion  a  man  whom  we  might  style  a 
"Professor"  in  the  art  of  detecting  bad  money  came  into  the  bank 
bringing  with  him  a  number  of  rather  unskillfully  executed  counterfeit 
National  bank-notes.  These  he  showed  to  the  Tellers,  enlarging 
somewhat  upon  those  points  in  the  bills  which  revealed  their 
fraudulent  character,  and  solicited  an  opporttuiity  to  give  to  the 
officers  for  the  sum  of  ten  dollars  special  instruction  in  his  ' '  secret 
art "  of  detecting  counterfeit  bills.  It  needed  but  little  conversation 
with  this  professor  to  convince  the  Tellers  of  what  they  suspected 
at  the  outset,  that  the  man  was  an  impostor.  There  are  lao  secrets 
in  the  art  of  detecting  counterfeits.  There  are  no  short  roads  to 
a  knowledge  of  the  busmess.  Careful  study,  long  experience  and 
a  natural  aptitude  for  this  work  wiU  make  any  bank  officer  an 
expert.  One  of  the  best  schools  for  acquiring  skill  in  detecting 
counterfeits  existed  in  the  Suffolk  Bank  of  Boston  at  the  time 
it  was  carrying  on  the  business  of  redeeming  the  bank  bills  of  all 
New  England  when  an  immense  variety  of  issues  of  its  State  bank  notes 
were  m  circulation,  and  out  of  that  old  "  foreign-money  shop  "  there 
graduated  men  who  can  to-day  give  points  to  any  peddler  of  the 
so-called  secrets  of  the  art  of  detectuig  bad  bills.  The  skill  of  these 
Suffolk  sorters  and  counters  was  the  outcome  of  long  and  patient  labor 
combmed  with  a  natural  talent  for  the  work.  There  were  some  clerks 
in  the  "foreign-money  department"  who  had  labored  in  it  twenty 
years  who  were  the  poorest  sort  of  authority  in  this  matter  of  coun- 
terfeit detecting,  for  they  were  naturally  dull  students  in  this  field, 
while  there  were  others  with  nimble  fingers,  sharp  eyes,  clear  heads 
and  marvellous  cuteness  who  were  the  keenest  sort  of  expei-ts  there. 
These  last  never  made  any  mystery  of  the  business  of  counterfeit 
discovering — never  pretended  there  was  any  secret  in  the  business.  In 
time  they  could  detect  and  condemn  bad  bills  at  sight  with  a  facility 
which  seemed  wonderful  to  outsiders,  but  their  skill  was  simply  the 
result  of  a  cultivated  talent. 

Yet  one  more  danger  menaces  the  handler  of  our  paper  circulation. 
I  refer  to  National  Bank  notes  stolen  when  unsigned  and  put  in  circu- 
lation by  the  thieves.  These  are  not  redeemed  either  by  the  banks  or 
the  Treasury  department  except  in  a  few  exceptional  cases  where  the 


THE    PAYING  -  TELLER   AND    HIS    CASH.  45 

bank  has  recognized  its  responsibility  for  the  care  of  such  bills  and  the 
impossibility  of  any  individual  identifying  them  as  stolen  and  has 
honorably  assumed  the  loss  and  relieved  the  innocent  public.  In  cases 
where  the  circumstances  are  such  that  the  parties  who  allowed  them 
to  be  stolen  in  an  incomplete  state  are  not  to  be  held  responsible  for 
them,  Congress   should  make  an  appropriation  for  their  redemption. 

BRANDING  WORTHLESS  BANK  NOTES. 

Section  5  of  an  Act  of  Congress  of  June  30,  1876  requires  National 
banks  to  stamp  or  write  in  plain  letters  the  words  "counterfeit," 
"altered  "  or  "worthless  "  upon  all  fraudulent  circulating  notes  which 
they  shall  get  hold  of.  If  by  error  they  shall  wrongfully  thus  mutilate 
any  Katiovial  notes  and  greenbacks,  they  must  pay  all  damages.  But 
such  errors  may  be  easily  repaired  by  simply  sending  in  for  redemption 
the  note  improperly  stamped — sending  with  it  a  statement  of  the  facts 
in  the  ease. 

This  new  law,  like  many  other  features  of  the  National  Bank  Act, 
is  but  a  copy  of  the  law  the  passage  of  which  through  our  State  Legis- 
lature was  procured  by  the  able  managers  of  the  Suffolk  Bank  more 
than  twenty  years  ago,  at  a  period  when  the  Suffolk  system  was  in  fuU 
activity,  and  its  immense  daily  redemptions  of  country  bank  bills  were 
requiring  a  larger  force  of  bank  clerks  than  it  or  any  other  Boston  bank 
has  ever  employed  before  or  since. 

Tliis  Massachusetts  law,  which  was  the  prototype  of  the  National 
law  just  mentioned,  obliged  the  Suffolk  to  stamp  indelibly  every  bad 
bill  which  fell  into  its  hands,  and  this  they  did  by  getting  up  a  sort 
of  branding  arrangement,  in  which  a  hot  iron  and  some  sort  of  very 
black  liquid  combined  to  give  a  condeuuied  bill  so  bad  an  aspect  that 
its  career  of  ' '  usefulness  "  as  paper  money  was  summarily  ended. 

Previous  to  the  passage  of  this  ' '  stamp  act, "  the  effects  of  wliich  we 
have  observed,  it  was  the  custom  of  the  foreign  money  clerks  of  the 
Suffolk  Bank  to  place  upon  the  back  of  every  bad  bill  they  received 
from  a  depositor  a  memorandum  giving  the  date  of  its  reception  and 
detection  and  the  initials  of  the  detecting  clerk.  A  record  of  the  same 
character  was  also  made  in  a  book  kept  for  the  purpose,  to  which  was 
added  the  name  of  the  depositor  to  whom  the  bill  was  retui-ned — for 
these  marked  and  condemned  bills  were  Invariably  afterwards  returned 
to  their  owners  with  a  full  statement  of  the  reasons  for  their  refusal. 
The  reason  for  makmg  all  these  marks  and  records,  and  also  the 
reasons  for  the  subsequent  passage  of  the  law  requiring  the  complete 
mutilation  of  bad  bills,  will  be  found  in  the  fact  that  the  returned, 
marked,  numbered  and  condemned  bank  notes  were  very  often  found 
in  circulation  again,  doing  honest  work  in  honest  hands,  having  been 
wilfully  and  dishonestly  put  afloat  by  the  depositors  to  whom^  they 
had  been  returned. 

By  the  aid  of  the  marks  and  numbers  upon  their  backs,  the  dishonest 
circulator  could  at  any  time  be  traced  out  by  the  victims  who  under- 


46  PRACTICAL   BANKING. 

stood  the  Suffolk  system.  When  such  detections  were  made,  the  rogues 
were  quite  in  the  habit  of  flatly  denying  the  charge,  or  of  declaring  the 
paying  out  was  entirely  accidental;  but  they  ahvays  saw  the  necessity 
of  taking  back  the  bill  at  its  face.  Bank  officers  do  not,  so  far,  seem  to 
have  given  the  new  United  States  law,  requiring  them  to  brand  plainly 
all  the  bad  bills  that  come  into  their  hands,  the  attention  it  deserves 
and  demands.  A  few  of  the  banks  in  the  principal  cities  have  procured 
neat  stamps,  and  specimens  of  then*  work  have  made  their  appearance ; 
but  other  banking  institutions  appear  hardly  aware  of  the  requirements 
of  the  law,  smce  they  allow  the  dangerous  bills  to  go  back  unmutilated 
to  the  parties  who  deposited  them. 

The  proportion  of  worthless  National  bills  in  circulation  is  very 
small  when  we  take  into  consideration  the  volume  of  National  bank 
circulation.  Tinder  the  old  State  system,  there  was  a  far  greater 
amount  of  counterfeiting;  and,  as  for  alterations,  a  Teller  of  very  large 
experience  informs  us  he  has  never  yet  fallen  in  with  a  single  altered 
National  bank  note. 


THE    RECEIVING -TELLER    AND    THE    DEPOSITORS.  47 


CHAPTER   III. 

THE   RECEmNG-TELLER  AND  THE   DEPOSITORS. 

This  oflBcer.  who  holds  one  of  the  most  important  of  bank  positions, 
besides  good  abihties,  requires  a  natural  tact  and  taste  for  handling 
money.  He  has  a  deal  to  do  with  the  public  and  should  have  a  large 
fund  of  patience  and  courtesy,  since  much  of  the  good  will  of  the  bank 
may  be  said  to  be  at  his  disposal. 

Dealers,  in  making  their  deposits,  are  apt  to  judge  of  the  general 
tone  of  the  bank  by  the  carriage  of  the  Receiving-Teller.  He  receives 
a  less  salary  than  the  Paying-Teller,  gives  smaller  bonds,  and  is  con- 
sidered a  standing  candidate  for  the  higher  position  of  Paying-Teller. 

In  fact,  his  position  and  duties  are  best  understood  if  he  is  ^^ewed 
as  an  assistant  to  the  Paying-Teller ;  for,  in  the  system  and  philosophy 
of  banking,  he  is  really  such,  and  notliing  more  nor  less.  His  work  and 
his  books  are  best  comprehended  when  considered  as  shnply  supple- 
mentary to  those  of  the  Paying-Teller.  He  stands  at  Ms  coiinter  and 
receives  all  the  deposits  made  with  the  bank ;  and,  where  there  is  no 
Note-Teller,  all  the  money  that  is  paid  on  the  collection  notes ;  but  so 
far  as  these  receipts  are  cash  they  are  handed  over  to  the  Paying-TeUer 
with  a  proper  record  of  the  dehvery  and  when  they  include  cheeks 
which  are  given  to  a  collection  or  correspondence  department  such 
funds  are,  with  more  or  less  detail,  charged  to  the  Paying-Teller,  and 
thus  put  mto  his  books  and  department. 

Wlien  the  Paying-Teller  takes  vacations  it  is  the  Receiving-Teller 
who  usually  does  his  work. 

In  active  banks  the  Receiving-Teller's  position  is  an  arduous  and 
trying  one,  and  his  responsibilities  large.  He  should  be  fairly  paid  and 
well  appreciated  by  bank  and  dealers.  Customers  can  help  liim  along, 
and  at  the  same  time  help  themselves,  by  paying  notes,  making  deposits, 
and  calling  for  certificates  of  deposits  early  in  the  day. 

The  Receiving-Teller  will  And  liis  duties  greatly  hghtened  by  the 
adoption,  on  Ms  part,  of  a  thoroughly  systematic  method  of  the 
administration  of  Ms  place.  He  stands  at  the  gate  of  customs;  and 
from  all  who  pass  over  to  Mm,  for  their  credit  on  the  books  of  the 
bank,  cash,  checks,  drafts,  coupons,  or  any  kind  of  funds,  he  should 
require  a  carefully  prepared  accompanying  description  of  the  deposits 
made  m  the  shai^e  of  deposit-tickets  or  credit-tickets,  giving  in  detail  a 
statement  which  shows  of  just  what  the  deposit  consists.  These  original 
tickets,  after  being  carefully  compared  with  the  matter  accompanying 


48 


PRACTICAL    BAXKIXQ. 


theiii,  and  checked  off,  are  filed  awa^'  by  the  TeUer,  and  they  often 
become  exceedingly  valuable  for  reference,  in  case  differences  and  mis- 
understandings occur  as  to  credit  dealings  with  depositors.     In  many 

First   National  Bank  


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Form  3— left-haud  page. 

banks  the  Book-keeper  makes  most  of  his  credit  entries  from  these 
original  tickets. 

The  Receiving-Teller  needs  but  a  single  book  so  ruled  as  to  enable 
him  to  record  the  amount  of  each  deposit  or  other  receipt  with  the 
name  of  the  account  to  be  credited,  and  also  including  an  account  with 
the  Paying-Teller.  In  the  form  I  give  (Form  3,  right  and  left-hand 
pages), which  is  a  very  well-arranged  sheet,  and  furnished  by  a  bank  m 
a  Clearing-House  city,  the   disposition  of  the  checks  received  from 


THE    KECEmNG  -  TELLER    AXD    THE    DEPOSITORS. 


49 


depositors  is  shown  by  the  charges  to  the  several  banks  of  tlie  Clearing- 
House  and  to  collection  agents  at  several  country  points  while  the  cash 
has  been  made  up  mto  round  sums  and  given  and  charged  to  the 

^^^<-^^-.  /^cjff  .^tA  ^f'po. 


Form  3 — right-liand  page. 

Paying-Teller.  To  this  account  with  the  Paying-Teller  also  the  footings 
of  the  various  other  accounts  are  finally  transferred  and  the  agreement 
of  its  balance  with  the  cash  remaining  on  hand  at  the  close  of  the  day 
proves  the  correctness  of  all  the  entries. 

While  the  Recei\'ing-Teller  is  thus  able  to  show  on  a  single  book  the 
record  of  all  liis  work  he  may  nevertheless  claim  that  he  is  required  to 
make  entries  in  more  books  tlian  any  other  clerk  in  the  bank,  and  make 


50  PRACTICAL   BAXKIXG. 

his  boast  good  by  producing  tlie  numerous  pass-books  of  the  depositors. 
As  these  are  so  continually  in  the  foreground  in  this  depai-tment  let  us 
give  them  a  httle  consideration.  The  familiar  standard  form  of  bank 
pass-book  now  in  general  use  is  probably  about  as  well  adapted  to  its 
use  as  any  of  the  bank  stationery,  biit  the  manner  of  using  it  can  in 
anany  eases  be  much  improved  both  by  bank-clerk  and  dealer. 

1.  THE  ENTRIES. 

Let  every  entry  be  made  neatly  and  correctly. 

Theh'  appearance  m  this  respect  is  quite  indicative  of  the  character 
of  the  clerks  who  handle  them. 

Then  TeUers  and  depositors  should  co-operate  in  the  endeavor  to 
have  every  deposit  entered  upon  the  pass-book  at  the  time  it  is  made. 

If  the  dealer  will  always  take  the  pass-book  with  him  when  he 
makes  a  deposit  and  carefully  see  that  his  deposit  is  correctly  written  in 
it  before  he  leaves  the  bank,  this  point  can  very  readily  be  lived  up  to. 

It  is  an  excellent  plan  to  have  a  bank  rule  that  no  deposits  or  credits 
of  any  sort  shall  be  entered  upon  pass-books  except  by  the  officer  who 
makes  the  original  credit  entries  upon  the  books  of  the  bank,  which 
officer  is  the  Receiving-Teller.  Where  entries  are  made,  for  instance, 
by  discount  clerk — entries  of  discount  credits — he  may  forget  to  com- 
plete the  business  by  passing  over  to  the  Receiving-Teller  corresponding 
credit  tickets,  and  thereby  bring  the  books  of  the  bank  into  confusion. 
There  have  been  instances  of  wilful  neglect  of  the  character  last  named, 
wliich  have  been  one  of  the  many  methods  by  wliich  bank  irregularities 
have  been  earned  along  and  covered  up. 

Where  running  accounts  are  kept  with  out-of-town  depositors,  who 
are  often  sending  deposits  by  mail,  and  who  seldom  find  it  convenient 
to  have  their  deposits  entered  on  a  pass-book,  pass-books  should  not 
be  issued ;  but,  in  lieu  thereof,  theh  mail  remittances  should  be  duly 
acknowledged,  and  an  account  current  rendered  at  close  of  each  month, 
just  as  is  done  in  case  of  accounts  with  corresponding  coimtry  banks. 

2.    WRITING    UP  AND  BALANCING. 

The  most  important  thing  that  can  be  said  under  the  head  of  pass- 
books is  that  they  should  never,  if  it  can  possibly  be  avoided,  be 
allowed  to  run  along  month  after  month  without  being  brought  to  the 
bank  and  balanced — verified  with  the  books  of  the  bank.  Each  month 
— say  sometime  durmg  the  first  week  of  each  month— the  Book-keeper 
should  bring  to  the  Cashier  a  list  of  all  the  accounts  which  have  not 
been  verified  by  pass-books  or  acknowledged  by  letter,  and  the  Cashier 
should  then  endeavor  to  secure  the  balance  of  the  verifications. 

The  depositor  should  always  send  his  pass-book  into  the  bank  just 
before  the  close  of  each  month  so  that  the  bank  shall  have  time  to 
write  it  up  and  balance  it.  And  the  bank  should  invariably  have  all 
these  books  promptly  balanced  and  ready  for  dehvery  on  the  morning 
of  the  first  day  of  the  month. 

In  a  bank  having  many  officers,  it  is  a  custom  for  all,  or  at  least 


THE    RECEIVING -TELLER    AND    THE    DEPOSITORS.  51 

nearly  all,  of  tlieiii  to  assist  in  this  monthly  work  of  writing  up  the 
pass-books.  The  deposits,  discounts  and  other  credits  of  the  pass-books, 
are  supposed  to  have  been  promptly  written  in  as  they  were  made. 
But  the  writing  in  of  the  checks  and  the  striking  of  the  balances  can 
only  be  done  when  the  work  of  the  month  has  drawn  to  a  close,  and 
it  must  therefore  come,  as  the  bank  officers  express  it,  "all  in  a  heap," 
and  all  the  clerks  who  have  any  spare  time  for  the  work  must  bend 
to  it  and  do  all  they  can ;  for,  in  every  well-regulated  bank,  as  I  have 
said,  all  the  pass-books  which  have  been  sent  in  must  be  proiuptly 
ready  for  delivery  at  the  openmg  of  business  on  the  first  of  the  new 
month. 

Although  the  work  must  mainly  be  done  under  the  pressure  for  time 
which  I  have  mdicated  the  bank  officer  ought  to  bear  carefully  in  mind 
that  it  is  his  duty  to  write  up  these  books  in  a  legible  and  easily  under- 
stood style,  both  as  regards  the  entry  of  the  checks  upon  them  and  the 
work  of  striking  the  balances.  The  depositors  have  a  right  to  expect 
that  their  books  shall  be  thus  manipulated,  and  the  bank  which  allows 
slovenliness  and  carelessness  to  creep  into  this  portion  of  its  clerical 
work  is  ia  danger  of  falling  into  a  certain  degree  of  discredit  with  its 
dealers. 

The  practice  of  entering  the  checks  upon  separate  slips  of  paper, 
specially  ruled  and  cut  for  the  purpose,  has,  of  late  years,  obtained  in 
many  banks.  I  see  no  particular  objection  to  this  custom ;  and  it  has 
its  particular  advantages,  since  it  gives  the  bank  officers  a  chance  to 
work  at  writing  up  long  lists  of  checks  in  advance  of  the  return  of  the 
pass-books  at  the  last  day  of  the  month,  and  also  prevents  the  pass-book 
from  being  rapidly  and  unnecessarily  flUed  with  these  details  of  charges. 

3.   PROVING  AJVD  DELIVERY. 

Here  we  note  a  point  of  great  importance  relative  to  the  management 
of  the  pass-books.  Any  of  the  clerks  may  write  in  them  in  this  close 
of  the  month's  rush,  and  may  be  allowed  to  strike  the  balances.  But 
no  pass-book  should  be  delivered  to  the  depositor  by  the  Teller,  through 
whose  hands  they  are  usually  passed  out,  until  the  entering  and  the 
balanemg  has  been  seen  by  the  Book-keeper,  the  balance  checked  off 
on  his  books,  and  some  check  mark,  which  the  Teller  recognizes,  made 
upon  the  pass-book. 

In  some  banks  the  precaution  is  taken  to  have  all  the  pass-books 
sent  occasionally,  or  even  as  often  as  the  close  of  every  month,  tlirough 
the  hands  of  President,  Cashier,  or  Director,  to  be  by  him  carefully 
checked  off  by  the  books  or  trial  balance-sheet  before  their  deUvery  to 
the  depositors.  This  plan  had  its  origin  in  great  bank  defalcations, 
where  the  pass-books  had  been  written  up  correctly,  while  the  books 
of  the  victimized  bank  were  being  thrown  by  dishonest  officers  into  a 
state  of  the  utmost  confusion  in  order  to  conceal  current  abstractions 
by  the  defaulting  officers. 

It  is  a  matter  of  surprise  that  banks  do  not  often  and  systematically 


52  PRACTICAL    BAXKIXG, 

obtain  from  their  individual  depositors  some  formal  acknowledgment 
of  the  correctness  of  these  accounts  rendered  them  by  the  banks. 

Few  banks  neglect  to  secure  from  their  corresponding  banks 
acknowledgments  of  correctness  of  accounts  as  often  as  once  a  month ; 
yet,  in  the  matter  of  pass-books,  few  banks  do  otherwise  than  drift  along 
on  the  plan  of  accepting  silence  as  consent — no  report  as  equivalent 
to  an  acknowledgment. 

An  experienced  bank  Cashier,  located  in  New  York  State,  adopts  a 
very  intelligent  method  in  the  management  of  his  Depositors'  pass- 
books ;  and  I  doubt  not  there  are  other  Casliiers  who  are  doing 
something  of  the  same  sort. 

Not  long  ago  this  bank  of  which  I  speak,  found  that  it  had  on  its 
hands  a  suit  of  a  depositor  for  quite  a  sum  of  money,  based  upon  a 
claimed  reponsibility  on  the  part  of  the  bank  for  an  irregularity  in 
pass-book  and  vouchers,  which  was  of  two  years'  standing.  In  all  tliis 
period  the  depositor  had  received  his  pass-book  and  checks  from  the 
bank,  and  never,  till  the  time  of  the  suit,  expressed  a  word  of  dissatis- 
faction with  the  balances  shown  and  checks  returned. 

But,  in  the  lawsuit,  the  depositor  won,  whereupon  his  bank  intro- 
duced an  excellent  method  which  I  would  recommend  to  all  banks. 
It  set  up  the  practice  of  returning  with  every  pass-book  a  slip  of  this  '' 
style,  which  printed  voucher  each  depositor  must  till  up  and  sign : 


H.  F.  JONES,  Cashier. 

NATIONAL  BANK  OF  THE  UNION. 

Dear  Sir: 

We  are  in  receipt  of  your  Statement  of  account,  -with 

vouchers,  to ,  closing  -with  talance  to ^. 

credit  of  $ 

■  "ioo 

The  same  have  been  examined  and  are  correct. 


N.  B.— Depositors  are  requested  to  sigii  and  proiiiptly  return  this  form,  ^vitli  the 
blanks  properly  filled. 


I  have  in  mind  a  pass-book  story  or  two,  from  real  life  in  banking 
and  from  real  life,  too,  that  has  passed  under  my  personal  observation, 
which  point  the  lessons  I  have  been  giving  under  this  head. 

He  came  to  the  Cashier  of  the  venerable  Bank,  bearing  in 

his  hand  an  old  unbalanced  pass-book,  the  last  entries  in  which  had 
been  a  series  of  pretty  good-sized  deposits,  made  fifty  years  ago.  The 
book  had  belonged  to  his  deceased  father ;  and  somehow  the  son  had 
got  firmly  imbedded  in  his  mind  the  belief  that  there  was  still  in  the 
old  bank  a  credit  balance  due  that  pass-book.     The  bank  was  a  well- 


THE    RECEIVING  -  TELLER    AND    THE    DEPOSITORS.  53 

regulated  institution  that  kept  all  its  old  books,  checks,  etc.,  and 
Avithout  stopping  to  question  the  validity  of  so  old  a  claim,  it  hunted 
up  the  old  checks  and  books,  wrote  up  the  pass-book,  and  returned  it 
pi*omptly  to  the  presenter  with  a  showing  that  proved  that  nothing  was 
due  to  either  the  past  or  the  present  generation  on  that  book.  One 
more,  and  showing  an  ever-present  danger. 

He  kept  a  small  account  at Bank.     He  was,  as  it  turned  out, 

a  "bad  lot."  By  the  error  of  a  hun-ied  Receiving-Teller,  a  credit  for 
a  $500  deposit  which  belonged  to  another  depositor  was  made  upon  his 
pass-book.  At  the  end  of  the  month  the  mistake  was  discovered  by 
the  bank,  and  it  endeavored  to  right  it.  But  the  man  of  the  wrong 
credit  declared  the  money  was  his,  swore  to  the  lie  that  he  made  that 
deposit,  and  tlu-eatened  to  sue  the  bank  for  the  amount.  The  badgered 
bank,  lame  because  it  had  made  a  radical  error,  and  at  a  great  disad- 
vantage because  it  was  fighting  a  liar,  fmally  concluded  to  pocket  the 
loss  and  allow  the  stolen  credit  to  the  thief. 

Although  I  started  out  with  the  statement  that  the  ordinary  form 
of  pass-book  was  very  satisfactory,  I  venture  to  suggest  some  improve- 
ments in  their  construction  which  in  part,  at  least,  are  new,  and  I  trust 
worth  looking  into. 

The  practice  of  entering  the  debits — the  checks  paid — upon  a 
separate  slip  of  paper,  the  slip  being  returned  loose  with  the  checks  at 
the  end  of  the  month,  is  one  which  I  have  deemed  allowable  on  the 
score  of  its  great  convenience  to  the  bank.  Yet  the  separation  of  the 
slip  from  the  pass-book  is  a  decided  objection,  since  it  is,  for  this  reason, 
likely  to  be  lost  or  destroyed  by  the  depositor,  although  it  is  an  import- 
ant record,  and  one  that  should  be  carefully  preserved  with  the  book. 
Here  is  a  plan  for  remedying  this  defect  : 

Have  the  pass-book  built  in  what  might  be  termed  a  skeleton  form 
— made,  to  begin  with,  with  good  covers,  one  single  leaf  inside  (two 
blank  pages),  and  a  sort  of  scrap-book  arrangement  of  margins,  by 
which  leaves  could  be  added  every  month.  On  the  proper  page  of  the 
flj'st  leaf  enter  all  deposits  as  they  are  made.  Then,  at  the  end  of  the 
month,  "gluten "  in,  on  the  stub  or  margin  which  stands  ready  for  the 
next  leaf  of  the  book,  a  second  leaf,  on  one  side  of  which  has  been 
entered  beforehand,  and  at  the  convenience  of  the  bank  clerks,  all 
the  checks  paid  during  the  month.  The  book  thus  carried  on  will 
continually  present  a  page  ready  for  deposit  entries,  and  a  place  for 
insertion  of  the  written-up  debit  sheet. 

This  plan  will  answer  better  than  the  one  now  in  vogue,  Avhich 
requires  the  use  of  the  separate  and  loose  check  slip. 

But  there  is  another  new  pass-book  plan,  which  I  consider  an 
improvement  over  the  one  I  have  been  describing.  It  is  particularly 
desirable  for  active  accounts  in  large  banks  : 

Issue  to  every  depositor  whose  transactions  are  many — who  draws  a 
great  number  of  checks,  and  makes  many  deposits — two  pass-books. 


54 


PRACTICAL    BAXKIXG. 


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Form  5— left-hand  page. 


THE    RECEIVING  -  TELLER    AND    THE    DEPOSITORS. 


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Form  5— riglit-liaiid  page. 


56  PR  ACTIO  AI/    BACKING. 

One  shall  be  a  credit  pass-book,  upon  which  all  deposits  are  made  as 
they  are  entered;  the  other  a  debit  pass-book,  upon  which  shall  be 
entered  at  the  convenience  of  the  clerks  as  before,  and  so  as  to  be  ready 
for  the  depositor  at  the  close  of  the  month,  or  oftener  if  desired,  all  his 
checks  paid  during  the  month  or  other  period,  the  balance  resultmg 
from  the  transactions  recorded  on  the  two  books,  being  struck — figured 
out^ — on  the  credit  pass-book,  this  last  being  somewhat  in  the  nature  of 
a  principal  pass-book,  and  the  other  being  a  sort  of  supplement  to  it. 

I  elsewhere  give  a  description  of  the  London  system  of  banking  and 
book-keeping,  and  have  pointed  out  instances  in  which  London  banking 
methods  might  be  copied  in  this  country  with  advantage. 

See  Form  5,  right  and  left-hand  pages,  on  pages  54  and  55,  for  a  fac 
simile  of  a  London  pass-book  (prepared  by  a  London  bank  officer), 
which  is  an  exact  reproduction  of  the  entries  in  the  form  in  which  they 
would  be  made  in  such  a  book.  We  find  some  curious  and  instructive 
features.  The  writer  became  so  much  interested  in  the  study  of  Enghsh 
novelties  in  practical  banking  as  to  make  a  resolution,  if  he  ever  -sisited 
Europe  again,  to  look  particulai-ly  into  this  department  of  business  as 
conducted  in  the  different  countries  with  a  view  of  comparing  their 
systems  of  practical  banking  ^vith  those  in  vogue  m  this  country : 

This  London  book  needs  a  few  explanations.  In  the  first  place,  my 
friend  has  cast  a  deep  shadow  on  the  fair  fame  of  our  London  brother 
l)ank  clerk  by  an  error  in  bringing  forward  the  balance  of  March  31, 
and  by  errors  in  the  footings  which  follow  it. 

Let  us  hope  that  the  L.  and  W.  Bank  discovered  that  error  in  the 
l>alance  in  time  to  save  the  £200  which  it  cost  them. 

Still,  as  a  clear  presentation  to  the  eye  of  the.  appearance  of  an 
Enghsh  pass-book  owe  fac  simile  is  very  successful.  Notice  that  it  is  the 
custom  to  balance  such  pass-books  only  once  a  quarter.  It  will  also  be 
seen  that  in  it  are  recorded  the  names  of  the  payees  of  the  checks 
charged,  and  they  are  entered  in  the  order  of  the  dates  of  their  pay- 
ments— both  very  good  ideas.  Another  novelty  in  this  book,  and  one 
which  can  also  be  recommended,  is  its  method  of  entering  discounts. 
Under  date  of  January  30th  is  an  entry  which  means  to  state  a  credit 
of  a  promissory  note  for  £300,  due  the  3rd  of  May  which  had  been 
discounted  for  this  depositor.  Under  the  same  date  the  depositor  is 
charged  with  the  discount  on  this  note,  amounting  to  £3  15s.  On  May 
3d  the  dealer  is  charged  with  this  £300  promissory  note  as  it  matured, 
and  seems  to  have  provided  funds  for  its  payment  by  giving  a  new 
note  for  £200  due  6th  of  August — see  credit  of  May  3rd  for  that  amount 
and  charge  of  same  date  for  its  discount,  £2  10s.  The  loan  finally  ends 
by  the  charge  of  the  matured  note,  August  6.  This  pass-book  is 
occasionally  an  overdrawn  one,  and  on  it  there  are  charges  for  interest 
on  overdrafts.     See  June  30th,  charge  on  account  of  17s.  6d. 

The  book  is  closed  by  a  transfer  of  the  balance  to  the  bank's  branch 
at  Bayswater. 


THE   BOOK  -  keeper's   DESK. 


CHAPTER  IV. 

THE   BOOK-KEEPER'S   DESK. 

Here  we  shall  find  modern  ideas,  change,  and  progress. 

Probably  many  of  my  older  readers  will  recollect  when  the  printer 
did  not  help  the  Book-keeper  as  he  now  does  in  tlie  work  of  making 
headings  and  Usting  names,  and  when  every  day  called  the  Book- 
keeper to  the  long  and  monotonous  task  of  writmg  the  headings  and 
lists  of  depositors'  names  in  the  cash-books. 

To-day,  in  all  om-  large  and  most  systematic  banks,  all  the  ' '  writing  " 
in  the  chief  books  of  the  institutions,  which  was  formerly  done  by  the 
pen,  is  accomphshed  by  the  printer  in  such  a  neat  and  ingenious  style 
and  arrangement  that  the  Avorkmg  in  of  ever-varying  figures  is  left  as 
almost  the  sole  clerical  task  of  the  bank-officer. 

It  is  now  a  matter  of  constant  surprise  to  me  that  this  neat  and 
accurate  use  of  type  was  so  long  delayed. 

After  the  cash-book  entries  were  made  and  proved  came  the  posting 
or  transferring  of  the  debits  and  credits  on  each  account  to  the  bulky 
ledgers,  and  this  too  is  largely  done  away  with. 

Very  much  of  this  saving  of  labor  has  come  from  the  quite  general 
adoption  among  city  banks  of  the  Skeleton  Ledger  as  it  is  often  called, 
or  cash-book,  journal  and  ledger  combined;  the  "Boston  system"  as 
it  is  styled  in  New  York. 

This  form  of  book-keeping  originated  in  Boston  about  1852,  and  as 
may  be  supposed,  was  the  invention  of  a  man  whose  prime  idea  in  the 
matter  was  to  save  himself  work. 

A  Mr.  Lane,  who  was  the  Book-keeper  of  the  old  Cochituate  Bank, 
got  tired  of  writing  the  dealers'  names  over  and  over  every  day,  and 
prepared  a  form  with  a  wider  page,  whereby  he  only  had  to  write  them 
once  in  tliree  days.  With  the  natural  pride  of  an  inventor,  he  showed 
his  draft  of  the  new  form  to  the  Teller,  Mr.  J.  W.  Bailey,  afterwards 
with  the  Bank  of  North  America,  who  thought  it  a  good  idea,  and 
suggested  the  improvement  of  putting  a  daily  balance  column  between 
the  rulings  of  the  several  days,  and  thus  doing  away  with  the  ''Bal- 
ance Book. " 

Of  course  Mr.  Lane  accepted  this  important  improvement.  He 
re\'ised  his  sketch,  ordered  his  new  book,  and  when  he  found  how  well 
it  worked  undoubtedly  discarded  liis  old  ledger  as  others  have  done 
since. 

With  experience  the  form  has  been,  in  some  cases,  changed  a  little, 


o8  PRACTICAL'  BANKING. 

but  the  old  books  of  the  Coehituate  Bank,  still  stored  away,  show  the 
main  idea  to  have  been  put  in  use  at  that  time. 

Possibly  the  failure  of  the  Coehituate  Bank  may  have  had  some 
influence  in  the  matter,  but  whatever  the  reason  may  have  been  the 
system  did  not  get  mto  use  in  many  banks  during  the  first  twenty 
years. 

After  that  time,  and  while  Mr.  Charles  O.  Billings,  now  President 
of  the  Globe  National  Bank,  of  Boston,  held  the  office  of  National 
Bank  Examiner,  largely,  in  fact,  through  his  interest  and  advice,  the 
Boston  banks  one  after  another  adopted  it,  and  it  has  rapidly  extended 
to  other  points  as  its  usefulness  has  become  known. 

A  form  of  the  Skeleton  Ledger  correctly  ruled  and  printed  is  shown 
in  the  appendix  in  the  back  part  of  this  volume.  It  is  necessarily 
contracted  in  depth  and  does  not  show  the  book  in  full. 

The  full-sized  leaf  is  24  inches  in  length  by  19  inches  in  width,  and 
the  book  when  opened  takes  a  space  upon  the  desk  of  about  40  inches 
in  width. 

The  left-hand  page  begins  with  Monday,  and  the  work  of  six  days  is 
on  the  open  book — three  days  on  the  left-hand  page  and  three  on  the 
right.  The  book  accommodates  about  fifty  accounts  to  the  page,  and 
the  original  line  on  which  the  account  begins  (the  names  being  printed 
in  the  margin)  is  followed  through  to  the  end  of  the  book.  Quiet 
accounts — that  is,  accounts  drawing  but  few  cheeks — are  placed 
between  the  more  active  ones,  and  spaces  are  left  between  the  letters 
of  the  alphabet  for  new  accounts  to  be  written  in  as  they  are  opened, 
more  space  being  allowed  for  the  active  letters  like  B,  C,  H,  M,  R,  S, 
and  W,  than  for  the  others. 

If  a  bank  has  three  hundred  accounts  it  would  be  best  to  use  eight 
forms,  placing  bank  accounts  after  the  individual  accounts,  to  be 
followed  by  the  impersonal  accounts. 

After  the  book  has  been  arranged  for  the  business  of  the  bank  the 
balances  of  the  respective  accounts  are  placed  in  the  balance  column 
to  the  left  of  the  day  on  which  it  is  proposed  to  start  the  work,  all  the 
credit  balances  in  black  ink  and  all  debit  balances  in  red  ink,  Cash 
being  treated  as  an  account  and  entered  in  red  ink.  The  footings  of 
the  two  inks  should  agree,  as  they  make  up  the  trial  balance.  When 
this  is  done  we  are  ready  to  begin  the  day's  work. 

The  checks  which  are  paid  through  the  Clearing-House  are  entered 
in  red  or  blue  ink,  to  distinguish  thoin  from  checks  paid  over  the  counter, 
in  the  two  columns  marked  "  Checks  in  Detail,"'  and  added  up,  thus 
furnisliing  the  Teller's  proof  of  the  Clearing-House  settlement.  All 
checks  paid  over  the  counter  during  the  day  are  entered  to  the  respec- 
tive accounts  in  black  ink.  At  the  close  of  the  day's  business  all  the 
short  entries  are  carried  into  the  columns — "Total  cheeks"  and  "Total 
Credits  " — the  footings  if  the  work  is  correctly  done,  agreeing  with  the 
•work  of  the  Tellers.     The  balances  are  carried  forward,  proved,  and 


THE    book-keeper's    DESK.  59 

the  book  is  ready  for  the  next  day's  work  which  goes  forward  from 
that  time. 

To  the  enthusiast  in  blank-books  these  large  books  with  their  many 
rulings  of  various  colors  are  a  ''thing  of  beauty,"  and  the  Book-keeper 
with  a  taste  for  design  and  color  can  arrange  his  rulmg  so  as  to  be 
pleasing  to  the  eye  as  well  as  distinct  and  clear  for  the  daily  entries. 

It  adds  to  the  certainty  of  correctly  following  an  account  across 
the  wide  page  to  have  the  cross-rulings,  that  is,  the  horizontal  lines, 
varied  in  color.  I  have  seen  books  with  red,  blue,  and  black  lines  one 
after  the  other  all  down  the  page,  but  it  is  not  necessary  to  go  to  such 
an  extreme.  If  every  third  line  is  made  red  or  black  among  the  usual 
blue  lines  it  will  be  found  quite  enough. 

It  is  usually  luore  convenient  to  make  the  book  of  a  size  to  accom- 
modate six  months'  business,  and  for  economy  two  books,  or  a  year's 
supply,  may  be  prepared  at  a  time. 

An  old  Book-keeper  taking  up  this  style  of  keeping  his  accounts 
may,  as  he  finds  his  books  filling  up  and  being  succeeded  by  new  ones, 
object  that  he  cannot  readily  look  far  enough  back  in  his  accounts  and 
that  matters  on  which  inquiry  may  be  made  are  too  soon  inaccessible 
or  not  easily  found.  For  this  reason  and  to  supply  information  on  some 
other  points,  banks  using  this  style  of  book  have  at  times  felt  the  need 
of  some  sort  of  an  index.  Accounts  pass  into  it  and  out  of  it,  as  in  the 
rapidly  passing  months  and  years  new  accounts  are  taken  on  and 
dropped  out ;  and,  in  the  absence  of  an  index,  it  is  a  difficult  thing  to 
trace  the  history  of  the  rise  and  fall  of  any  of  them.  These  skeleton 
ledgers  are  very  large  books,  for  they  are  built  to  do  a  deal  of  work ; 
yet  they  are  soon  gone  thi'ough  with — filled  up — and,  when  full,  are, 
of  necessity,  consigned  to  an  unindexed  grave  in  the  archives  of  the 
bank. 

An  ingenious  bank  officer  of  New  York  has  copyrighted  a  plan  for 
permanently  indexing  these  central  record  books;  and,  where  his  idea 
is  adopted,  the  bank  manager  can  have  on  his  desk  a  book  of  moderate 
size,  ui  which  is  to  be  found  a  key  to  his  present  and  past  list  of 
depositors — a  digest  showing  concisely  when  they  opened  accounts  with 
the  bank,  when  they  may  have  closed  them,  what  sort  of  accounts  they 
were,  and  how  the  bank  treated  them  in  the  matter  of  interest  upon 
their  deposits,  accommodations  extended  to  them,  etc.,  etc. 

Such  a  book  will  surely  pay  for  the  labor  put  into  it  when  the 
sudden  call  comes  for  the  information  wliich  it  supplies.  In  some 
banks  it  might  be  advisable  or  more  satisfactory  to  keep  only  the 
individual  accounts  on  the  Boston  plan,  and  have  an  ordinary  ledger 
for  the  other  accounts.  Here  is  a  neat  form  of  journal  furnished  me 
from  an  interior  bank,  from  wliicli  the  amomits  would  be  posted  to 
the  ledger  accounts. 

Each  of  the  forms  on  page  60  (Form  6,  left  and  right-hand  pages) 
shows  a  page,  in  brief,  with  transactions  entered : 


60 

Journal.  { 
Cash,  Dr. » 


PRACTICAL    BAIfKIKG. 

Thursday,  Julj-  24,  1890. 


Bills  Discounted.    Bro-wn 

Jones 

National  currency  issued,  10, 10, 10,  ™0. 
Deposit  account 

Mercantile  National  Bank  + 

National  Bank  ol  Redemption  + 

Profit  and  loss.    Exchange 

Chemical  National  Bank.     Lawson . . . 

First  National,  Hartford.    Smith 

First  National,  Meriden.    Letter 

First  National,  Norwich.       "      

Bank  account 

Cash,  Dr 


1,000 
2,000 


500 
1,000 
2,000 
1,000 


Journal.  ) 
Cash,  Cr.  f 


Form  0— left-hand  page. 
Thursday,  July  24,  1890. 


3,000 

4,000 
30,000 

9,000 

3.000 

10 


4,500 


53,510 


Certificates  of  deposit 

Mercantile  National  Bank  t 

National  Bank  of  Redemption + 

Deposit  account 

First  National,  Hartford.     T.  Brown. 

First  National,  Meriden.    T.  Jones 

First  National,  Stamford.    N.  Mead,  1  Nat. 

F.  Collins, 
First  National,  Norwich.    J.  Peters, 
S.  Martin, 

Bank  account 

Cash,  Cr 


(   100 
J.      100 
(   50 

* 

1,000 
2,000 

*2o0 
11,000 

6,000 
20,000 

ICO 

100 

!    200 

100 

400 

500 

1 

3,700 

40,950 

Form  6— riglit-hanil  page. 

*  The  two  columns  marked  with  a  star  are  ruled  perpendicularly  with  five  fine 
lines,  dividing  them  into  small  squares,  one  lor  each  figure.  In  largo  Journals  this 
is  a  good  form,  as  it  tends  to  prevent  errors  in  footing  by  keeping  the  figures  in  a 
direct  line  with  each  other. 

i  We  keep  a  separate  book  for  our  reserve  agents,  and  transfer  the  footing  to 
Journal.  The  Mercantile  National  Bank  and  National  Bank  of  Redemption,  entered 
in  above  form,  are  reserve  agents. 

The  charges  of  BroAvn  and  Jones  are  notes  due  to-day,  and  are  to  be  found  on  the 
Tickler. 

The  other  charges  are  checks  sent  away  for  collection. 

Under  this  method  of  making  a  full  record  of  the  checks  sent  away,  on  the  books, 

a  copy  of  the  letter  is  not  necessary.    Those  who  prefer  to  keep  a  copy  of  letter  can 

make  full  record  of  checks  in  letter,  and  charge  it  in  the  Journal  in  one  item,  as 

follows : 

I  1  First  National,  Norwich.    Letter |  |     II       500 1  II  I  | 

Our  Deposit  Ledger  is  a  ledger  and  balance  sheet  combined.  We  enter  deposits 
and  checks  direct,  and  enter  footings  in  Journal  as  above. 

Everj^hing  is  an  original  entry  in  our  system  of  keeping  the  books,  thus  keeping 
the  chances  of  errors  at  a  minimum,  and  saving  much  labor. 


THE    BOOK-KEEPER'S    DESK.  61 

THE  CONDITION  OF  THE  BANK. 

Under  this,  or  some  similar  title,  every  bank  wliicli  has  its  full  com- 
plement of  books  will  show  its  General  Balance  Sheet  giving  at  a 
glance  the  exact  condition  of  the  institution. 

Here,  in  a  few  condensed  figures,  are  presented  in  a  wliolesale  style 
the  assets  and  liabilities  of  the  bank,  all  of  which  can  be,  if  the  bank's 
book-keepmg  is  what  it  should  be,  verified  and  fully  explained  in  detail 
by  reference  to  the  various  other  books. 

Some  banks  make  it  up  twice  a  week — on  days  of  Directors'  meetings ; 
in  others,  every  day ;  and,  in  active  banks,  with  large  and  complicated 
business,  it  is  desirable  that  its  daily  preparation  should  be  required. 

Cashier,  President,  Directors — every  body  engaged  in  the  work  of 
running  the  bank,  should  every  morning  have  before  them  this  concise 
statement,  showing  the  source  from  whence  came  every  dollar  the  bank 
is  managing,  and  also  where  every  one  of  those  dollars  has  been  scattered. 

With  this  before  him  the  active  Manager  of  the  bank,  be  he  Presi- 
dent or  Cashier,  sees  at  a  glance  the  result  of  the  business  right  up  to 
date,  and  by  examination  of  his  loan  balance  can  judge  whether  he  can 
prudently  still  further  increase  his  loan  or  whether  he  has  already  taken 
on  all  the  time  paper  he  can  safely  carry  with  his  present  supply  of 
fluids.    Thus  armed  he  is  re;wiy  to  negotiate  with  borrowers  intelligently. 

fie  may  also  note  just  how  the  Expense  and  Exchange  accounts  are 
running,  whether  any  apparent  leaks  or  carelessness  there  need  looking 
after ;  may  see  too,  the  Teller's  report  of  cash  and  can  observe  whether 
the  bank  is  getting  loaded  with  unusable  funds  or  whether  on  the 
contrary  the  Teller  is  getting  pinched  for  currency. 

The  income  accounts  are  also  under  his  eye,  the  credit  balances  of 
Discoimt,  and  Interest,  and  he  notes  whether  they  show  a  good  prospect 
for  the  next  dividend  or  whether  he  must  push  yet  a  little  harder  to 
make  sure  of  not  coming  short  of  the  amount  he  wants  to  see  there 
when  the  six  months'  period  ends,  and  the  bank  must  balance  off  its 
income  and  outgo  and  show  a  result  that  will  please  the  stockholders. 

Lastly,  I  will  mention  our  Manager's  scrutiny  of  the  balances  due 
to  and  from  correspondent  banks,  and  these  are  of  great  importance 
and  require  daily  attention ;  for  they  are  often  in  large  figures  and  some 
transaction  in  every  day  is  quite  likely  to  hinge  upon  their  condition 
and  the  questions  of  whether  the  bank  is  liable  to  be  suddenly  drawn 
upon  heavily  by  a  distant  correspondent,  or  whether  it  has  on  the  other 
side  large  idle  balances  at  other  points  which  should  be  more  profitably 
employed. 

The  form  I  here  present  is  a  most  practical  and  desirable  one,  and 
is  one  that  can,  without  many  changes,  be  applied  to  any  bank.  (See 
Form  7,  page  62.) 

The  statement  tells  its  own  story  quite  clearly — at  any  rate  so  clearly 
that  any  junior  bank  officer  who  studies  it  carefully  in  connection  with 
the  various  explanations  of  the  methods  and  machinery  of  the  other 


62 


PRACTICAL    BANKING. 


departments  of  a  large  bank  which  are  given  by  me  in  this  volume, 

may  understand  every  item  of  it. 

Bb.  Condition  of  the  Bank,  May  Ikth, 1890.  Ch. 


Bills   and    notes 
discounted 

U.  S.  Bonds  with 
Treasui-er  U.  S 

82,920,111 

589,000 

1 

61 

14 
65 

89 
03 
71 

72 

05 
53 

$0,509,111 

26,505 
8,855 

269 
48,000 

684,921 
416,023 

61; 

11 

13 

79 

92 
56 

Capital 

Surplus  fund.... 

Profit    and   loss 
account 

National  bank 
notes   issued 
(this  bank) 

Sundry  divid'ds. 
Dividend  No.  38. 
Expense  acct.... 
U.S.  tax  acct.... 
Shareh'ld'rs'  tax 
account 

Discou't  on  bills 

and  notes 

Interest  acct 

Exchange  acct .. 

Dub  to  other 

BANKS 

$74,637 
11,071 

05 

56 

76 

66 
13 

74 

$1,000,000 
400,000 

46,468 
529,980 

1,643 

1,060 

1,325 
9,000 

85,708 

287,224 
2,331,276 

59 
25 

61 

29 

82 
56 

TJ.  S.  Treasurer. . 

Comp.  Currency 
red'n  account.. 

5    %    fund    with 
Treasurer  U.S. 

Expense  acct 

TJ.  S.  tax  acct 

Uncol.  interest.. 
Exchange  acct... 
Premium  acct... 

Balance    of 

Cash,  viz.: 
Gold  cert.  $45,000 
Gold  Coin    79,-578 

124,578 
76,122 

178,200 

3,560 

29,262 
273,199 

Silv.,  Nickels,  &c. 
U.  S.  legal-tend'r 

Nat'l  bank  notes 
(this  bank) 

Notes  of  other 
banks 

Checks,  &c 

202,389 

7,577 

4,393 
1,579 

71,284 

Due  from  oth- 
er banks : 

129,641 

210,931 

2,457 

2,948 

7,471 
62,573 

Tenth    National 

Bank,  N.  Y.... 
Eleventh   Nat'l 

Bank,  N.  Y 
Farmers'   Nat'l 

Bank,  Phila  ... 
Fourth  Nat'l  Bk. 

Portland,  Me . . 
Fifth    Nat'l    Bk, 

Providence 

Twelfth  Nation'l 
Bank,  N.  Y.... 

Farmers'  Nat'l 
Bank,Balto.... 

Pacific    Bank, 
San  Francisco.. 

Sundry  places... 

Fourteenth  Nat. 
Bank,  N.  Y 

D  u  e  t  o  depos- 
itors  

Sundry  places. . . 

$4,693,686 

$4,093,686 

THE    BOOK-KEEPER'S    DESK. 


63 


To  illustrate  more  fully — here  is  another  form  of  a  General  Balance 
Book.  This  is  from  a  bank  outside  of  the  reserve  cities.  (See  Form  8 
below  and  the  itemized  explanation  following  it. ) 


1S90. 


United  States  Treasurer  (Government  Bonds) 

United  States  Tueasurer  (Reserve) 

Bills  Discounted 

Bills  Receivable 

Mercantile  Natl  Bank,  New  York  (Reserve)  — 

National  Park  Bank,  New  York  (Reserve) 

Hanover  Nat'l  Bank,  New  York  (Reserve) 

National  Bank  of  Redemption,  Boston  (Reserve) 

Expense  Account 

Cash  Account 

Bond  Account 

Suspense  Account 


Capital  Stock 

Surplus  Fund 

National  Currency  Issued. 

Profit  and  Loss 

Undivided  Profit 

Certificates  of  Deposit 

United  States  Tax 

Dividends  Unpaid 

Non-Resident  Tax 

Foreign  Banks  (Balance) 

Deposit  Account 


Dr.     January  28.    Cr. 


500,000 

00 

13,500 

00 

547,816 

36 

7^,611 

87 

44,256 

60 

25,992 

85 

6,092 

55 

56,187 

11 

19,000 

00 

$300,000 

00 

1.50,000    00 

270,000     00 

3,048 

81 

16,034 

48 

11,521 

05 

1,327 

28 

620 

00 

37,491 

23 

402,414 

49 

192,457 

34 

Sl,192,457 

34 

Form  8. 

A  clear  explanation  of  the  itemized  accounts  included  in  this 
General  Balance  Sheet  is  also  given  in  the  following  paragraphs  under 
the  headings  ' '  Assets  "  and  ' '  Liabilities  "  : 

Assets, 
United  States  Treasurer  (Government  Bonds) $300,000.00 

The  bonds  are  held  by  the  United  States  Treasurer  as  security  for  $270,000  of  cir- 
culating notes. 
United  States  Treasurer  (Reserve) $13,500.00 

This  amount  is  5  per  cent,  of  the  amount  of  circulation,  and  is  held  by  the  Treas- 
urer for  the  redcmptioQ  of  worn  and  mutilated  circulation  of  this  bank. 
Bills  Discounted $647,816.36 

This  is  composed  of  commercial  paper  and  other  notes,  with  bonds,  stocks  etc.,  as 
security,  discounted  by  the  bank. 
Bills  Receivable 

This  account  is  sometimes  chai'ged  with  long-time  paper  received  in  settlement 
of  notes  previously  held,  and  which  were  not  paid  at  maturity  in  consequence  of 
failures,  assignments,  etc. 

Mercantile  National  Bank,  New  York  (Reserve) $79,611.87 

Nation  A  l  Park  Bank,  New  York  (Reserve) \ $44,256.60 

Hanover  National  Bank,  New  York  (Reserve) $25,992.85 

National  Bank  of  Redemption,  Boston  (Reserve) , $6,092.55 

These  banks  are  all  reserve  agents  approved  by  the  Comptroller  of  the  Currency. 
The  total  amount  on  deposit  with  reserve  agents,  except  such  portion  as  is  legally 
necessary  for  reserve,  is  drawn  against  for  the  daily  requirements  of  business. 
Expense  Account 

To  this  account  is  charged  payments  for  salaries,  rents,  etc.  It  was  closed  De- 
cember 31, 1889,  no  entries  having  been  made  since  that  date. 


64  PRACTICAIi    BANKING. 

Cash  Account $56,187.11 

Is  cash  on  hand  in  the  bank,  and  includes  the  lawful  money  reserve. 
Bond  Account $19,000.00 

Itepresents  investments  of  the  bank  in  bonds  of  railroad  companies,  etc. 
Suspense  Account 

This  account  represents  such  items  as  are  in  doubt,  but  which  will  probably  be 
paid  in  time,  such  as  past-due  commercial  paper,  etc. 

Ziiabillties, 
Capital  Stock $300,000.00 

Represents  the  amount  actually  paid  in  by  the  stockholders,  and  is  an  obligation 
of  the  bank  to  them. 
Surplus  Fxind 3150,000.00 

Represents  the  profits  of  the  bank  over  and  above  those  needed  for  expenses  and 
dividends,  credited  up  to  this  account  from  time  to  time  since  the  organization  of  the 
bauk,  and  is  an  amount  in  which  the  stockholders  would  participate  if  the  bank  was 
wound  up,  or  in  part  if  the  Directors  should  vote  to  pay  a  portion  of  it  in  the  form  of 
a  di\'idend. 
National  CurrencyIssued $270,000.00 

Represents  the  amount  of  circiilating-  notes  received  from  the  Comptroller  of  the 
Currency  and  issued  by  the  bank,  the  same  being 9J  percent,  of  the  amount  of  United 
States  bonds  on  deposit  with  the  United  States  Treasurer  as  security  for  the  same,  90 
per  cent,  of  the  amount  of  bonds  being  all  the  currency  allowed  by  law. 
Profit  and  Loss $3,048.81 

Represents  the  amount  of  earnings  from  discount  of  commercial  paper  and  notes 
secured  by  collaterals,  profits  on  items  collected,  and  exchange  received  on  drafts 
issued  against  deposits  with  reserve  agents  (New  York  or  Boston)  since  December  31, 
1889,  when  the  accounts  of  the  preceding  six  months  were  closed,  and  when  balance 
to  the  credit  of  profit  and  loss  account  was  transferred  to  Undivided  Profits. 
Undittded  Profits $16,034.48 

Represents  profits,  carried  from  Profit  and  Loss  account,  in  excess  of  what  was 
required  for  losses,  expenses  and  dividend  of  January  1,  1890.    It  is  practically  the 
same  as  Surplus  Fund,  and,  if  added,  would  make  that  amount  $166,034.48. 
Certificates  of  Deposit $11,521.05 

Represents  certificates  issued  by  the  bank  for  money  deposited.    They  are  issued 
generally  to  those  who  keep  no  regular  bank  account,  and  who  temporarily  deposi:^ 
funds  for  which  they  have  no  immediate  use. 
United  States  Tax $1,327.38 

Represents  the  amount  of  United  States  tax  on  circulation  for  the  six  months 
preceding  January  1, 1890,  and  not  yet  paid  over  to  the  Government. 
Dividends  Unpaid $620.00 

Is  amount  of  last  dividend  which  is  still  uncalled  for  by  the  stockholders. 
Non-Resident  Tax 

To  this  account  is  charged  the  amount  paid  to  the  Town  Treasurer  for  tax  on  the 
shares  for  stockholders  who  reside  out  of  the  State. 
Foreign  Banks  (Balance) $37,4.91.23 

This  is  the  amount  due  to  banks  out  of  the  city  for  whom  the  bank  has  made 
collections  in  excess  of  amount  due  from  banks  that  make  collections  for  it. 
Deposit  Account $402,414.49 

Is  the  amount  due  to  depositors  having  accounts  with  the  bank. 

All  these  books  as  well  as  the  smaller  blank  and  inemorandum  books 
of  the  bank,  and  the  check  books  also,  should  be  made  in  the  neatest 
style  and  of  the  most  approved  forms.  It  costs  but  a  trifle  more  to 
have  these  things  prepared  on  excellent  paper,  with  good  binding  and 
printing,  than  it  does  to  get  them  up  in  a  slovenly  manner.  Good 
methods  and  neatness  of  manufacture  in  these  properties  of  banking 
reflect  credit  upon  the  management  of  the  institution  and  the  working 
habits  of  its  officers.  Each  department  through  its  proper  officer 
should  see  to  it  that  the  special  blank  books  regularly  in  use  are  not 


THE    BOOK-KEEPER'S    DESK.  65 

allowed  to  run  down  too  low  in  stock — that  time  enough  is  allowed  the 
stationers  of  the  bank  to  properly  manufacture  and  season  them. 

An  excellent  manner  of  covering  this  latter  point  is  for  the  officer 
using  check  and  other  blank  books  to  make  a  memorandum  on  the  last 
blank  page  of  the  last  book  he  has  on  hand  in  stock  to  the  effect  that 
it  is  the  last  one  on  hand,  which  memorandum  when  he  comes  to  use 
that  book,  will  serve  as  a  reminder  that  others  must  be  ordered  of  his 
stationer. 

/^SORTING   AND    CARE    OF    CANCELLED    CHECKS. 

Tlie  paid  and  charged  checks  and  vouchers  are  properly  in  the  care 
of  the  Book-keeper  so  long  as  the  bank  retains  them  and  should  be 
kept  nicely  assorted  and  ready  for  reference  at  a  moment's  notice. 

There  is  no  work  in  the  bank  which  ought  to  be  done  with  more 
system  and  care  than  this  work  of  assorting  cancelled  checks;  for 
mistakes  in  assorting  cause  great  annoyance  and  may  lead  to  worse 
troubles. 

If  the  Book-keeper  does  not  liimself  assort  his  checks,  work  of 
this  description  should  be  put  into  the  hands  of  clerks  who  understand 
well  the  names  and  styles  of  the  various  checks  which  are  regularly 
drawn  upon  the  bank,  and  who  are  skillful  and  systematic  in  their 
ways  of  work. 

I  have  been  shown  a  very  good  application  to  the  drawer  in  which 
banks  assort  their  paid  checks.  Pieces  of  tliick  card-board  are,  in  this 
plan,  cut  a  little  longer  than  any  checks  are  likely  to  measure ;  and,  on 
the  top  of  each  end  of  these  boards,  the  name  of  a  bank  depositor  is 
written  or  printed. 

Here  is  a  form  of  this  simple  little  contrivance,  and  I  give  it  here 
because  I  believe  those  bankers  who  haven't  it  already  will  at  once 
want  to  adopt  it : 


W.  E.  JONES. 


The  use  and  advantages  of  these  paste-boards  must  be  readily  seen. 
They  are  placed  as  di\ading  lines  in  the  check-drawers,  between  each 
customer's  checks,  and  the  names  on  the  wider  end  of  the  board  by 
showing  clearly  where  the  various  checks  are,  have  enabled  the  sorter 
to  easily  classify  them,  and  will  enable  the  Book-keepers  or  other  clerks 
to  readily  find  them. 

In  another  check-drawer  arrangement,  which  I  have  known  and 
which  certainly  has  the  merit  of  wearing  well  for  it  has  been  in  use  for 
years,  the  division  strips  are  made  of  little  pieces  of  hard-wood  board, 
with  the  names  of  the  various  depositors  affixed  to  the  upper  edge  of 
the  boai-d  by  the  use  of  printed  stickers.     The  difficulty  Avith  this  plan 


rf6  PRACTICAL    BAIS'KIXG. 

was  that  the  drawer  was  made  very  heavy  by  the  weight  of  the  necessa- 
rily rather  thick  division  boards. 

REPORTS  AND  RETURNS. 
If  the  Book-keeper  does  not  himself  make  up  the  various  returns 
which  are  called  for,  both  under  the  National  Bank  Act  and,  in  the 
case  of  State  banks  by  their  State  laws,  he  must  furnish  the  figures 
which  ai'e  needed  to  make  them  and  should  understand  the  forms 
on  Avhich  they  are  made  up. 

It  is  my  opinion  that  it  would  be  a  very  excellent  plan  for  every 
officer  employed  in  a  National  bank  to  learn  how  to  make  out  all 
its  returns. 

There  are  few  better  ways  in  wliich  to  learn  how  the  machine 

runs — to  acquire  a  complete  knowledge  of  the  philosophy  of  banking, 

and  an  intimate  acquaintance  with  its  methods  and  macliinery — than 

this  of  studying  how  to  make  out  these  returns. 

/'^^  An  able  young  bank  President,  who  was  new  to  the  methods  of 

/    National  banking,  but  not  new  to  the  subject  of  finance,  in  entering, 

j     not  long  ago,  upon  his  new  duties,  took  the  needful  blanks  and  the 

I     books  of  his  bank,  and  ciphered,  and  "WTote,  and  studied,  till  he  was 

\     able  to  make  out  from  original  sources  all  these  complicated  returns, 

\   without  the  aid  of  any  of  his  subordinates.     A  President  disciplming 

1  liimself  in  such  a  way  as  this  is  on  the  road  to  success  as  a  chief 

'  executive. 

Beside  the  returns  or  statements  of  condition  wliich  are  mainly  a 
copy  of  the  General  Balance-Sheet  of  the  bank  there  are  repoi-ts  to 
be  made  to  the  Clearing-House — when  located  Avhere  a  Clearmg-House 
exists  —  and  reports  which  are  a  basis  for  taxation,  or  for  official 
statistics. 

Of  this  natm*e  is  the  Return  of  Circulation. 

In  order  to  enable  the  United  States  Treasurer  to  assess  the  duty 
upon  circulation,  v.hich  is  one-half  of  1  per  cent,  every  half-year  upon 
the  average  amount  of  each  bank's  notes  in  circulation,  the  Casliier  of 
a  National  bank  must,  within  ten  days  fi-om  the  fii-st  of  January  and 
July  of  each  year,  make  a  return  under  oath  to  the  Treasurer  of 
the  United  States  of  this  required  circulation  average.  A  bank  not 
promptly  making  this  return  is  liable  to  a  penalty  of  §200.  But  it 
is  not  probable  that  the  Government  would  enforce  tliis  penalty  for 
any  sUght  accidental  delay.  It  was  put  into  the  Bank  Act  for  the 
purpose  of  punisliing  wilful  neglect.  This  circulation  return  is  made 
up  in  the  usual  manner  of  obtaining  an  average  by  adding  the  different 
amounts  wliich  the  bank  has  recorded  each  day  as  the  amount  of 
outstanding  circulation  and  dividing  tliis  sum  by  the  number  of  days 
in  the  six  months. 

The  Bank  Act  formerly  required  the  banks  to  make  a  semi-annual 
return  to  the  United  States  Treasurer  of  the  average  amount  of  capital, 
beyond  that  invested  m  the  United  States  bonds,  average  amount  of 


THE    B00K-KKEPEK\S    DESK. 


67 


deposits  and  average  of  circulation.  This  was  when  the  banks  were 
under  a  tax  upon  these  three  items,  which  they  have  now  been  reheved 
of  with  the  exception  of  that  upon  circulation.  The  old  law  demanding 
these  tlu-ee  returns  has  not  actually  been  repealed,  but  it  has  become  a 
dead  letter  because  the  object  for  Avhich  it  was  enacted  has  passed  away. 

The  President  or  the  Cashier  must  make  oath  to  all  these  returns 
to  the  Treasm-er  or  the  Comptroller  and  this  is  an  added  reason  for 
their  being  carefully  prepared. 

In  order  to  be  always  ready  to  do  this  work  in  the  most  correct 
and  prompt  manner,  a  book  arranged  to  give  quick  and  clear  service 
in  the  work  of  making  up  all  these  statements  is  a  valuable  aid  to 
the  Book-keeper. 

I  here  give  a  very  concise  and  handy  form  (see  Perm  9)  of  a  book 
specially  devoted  to  the  work  of  preparation  for  making  out  these 
returns,  which  under  the  best  system  is  -written  up  daily  and  which, 
with  some  few  variations,  such  as  will  readily  suggest  themselves  to 
any  Book-keeper  or  Cashier,  can  be  adapted  to  the  wants  of  any  bank, 
large  or  small,  in  city  or  country: 


n 


1               3           3 

i           5 

^ 

7 

8 

9 

10 

*3 

1 

8 

8 

a 
►3 

Due  from  Ba)iks  and 
Bankers,  including 
hills  of  other  Na- 
tional Banks. 

a 
P 

1 

II 

.9 

i" 

S 

!? 

CO    ^ 

is 

o  ■=- 

1 

r 

1 
2 

3 

H 

$3,700,700 
ave  31  lin 

$77,200 
es  dee] 

$54,100 
3,  one 

$119,600 
for  eacl 

$25,000 
264.300 

I  day. 

$235,200 

$1,057,900 
3,700 

$510,600 

$1,061,600 

$250,800 
26,500 

Form  9. 

1  consider  this  book  an  absolutely  indispensable  one,  though  I  find 
many  banks  manage  to  stumble  along  without  it — as,  in  fact,  they 
do  without  many  other  bank  books,  which  I  deem  necessaiy  to  the 
proper  administration  of  the  internal  economy  of  a  bank. 

This  book  should  be  neatly  and  strongly  bound  up  in  quarto  form, 
and  the  printing  in  it  should  be  of  a  clear  and  well-arranged  character. 
Have  the  book  made  thick  enough  to  last  some  years;  and,  when 
obtained,  see  that  the  needed  entries  are  made  in  it  every  day. 

It  will  prove  a  great  satisfaction  to  bank  Managers,  etc.,  to  see 
this  book  promptly  WTitten  up  to  date;  and,  thus  kept,  it  will  be  a 
source  of  satisfaction  as  well  as  of  valuable  information. 

The  figures  on  the  left  are  those  of  the  days  of  the  month,  and  it 
should  also  have,  for  convenient  reference,  a  similar  column  on  the 


68  PRACTICAL    BAJN-KIXG, 

right.     The  figures  at  tlie  liead  of  the  coliinins  I  have  placed  there 
for  the  purpose  of  indexing  my  explanations. 

(1.)  Represents  the  entire  loan  of  the  bank  —  its  investments  in 
notes,  bonds,  etc.,  etc. 

(2.)  The  gold  and  silver  it  is  carrying. 

(3.)  Its  legal-tenders  on  hand. 

(4.)  Its  balances  in  New  York  banks  which  are  its  reserve  agents. 

(5.)  Amounts  due  from  other  banks  and  bankers,  other  than  its 
reserve  agents,  and  the  bills  it  holds  of  other  National  banks.  These, 
under  Government  rulings,  count  in  carrying  reserves,  as  money  due 
from  other  banks. 

(6.)  All  amoimts  due  banks  and  bankers. 

(7.)  Deposits  and  di\'idends  declared,  but  unpaid.  Under  depart- 
ment rulings,  dividends  unpaid  must  be  counted  in  figuring  reserves  on 
deposits. 

(8.)  The  entire  amount  of  the  bank's  circulation  outstanding — those 
bills  on  hand,  either  unsigned  or  in  the  Teller's  cash,  having  been 
deducted. 

(9.)  Net  deposits  upon  which  reserve  must  be  held. 

(10.)  The  actual  amount  of  reserve  the  bank  is  holding,  all  around 
including,  of  course,  its  5  per  cent,  fund  in  Washington.  ^ 

From  a  book  thus  kept,  Managers  can,  at  a  glance,  see  how  their 
banks  are  running,  the  Clearing-House  retiu-ns  can  be  most  speedily 
made  up,  and  also  the  semi-annual  circvdation  tax  returns ;  and,  at  the 
same  time,  it  is  a  valuable  aid  in  the  work  of  making  up  Comptroller's 
returns. 

I  must  hint  in  this  connection  that  it  is  exceedingly  desirable  that 
all  bank  returns  should  be  made  in  the  promptest  manner,  and  bank 
managers  should  see  to  it  that  the  requirements  of  the  law  in  this 
regard  are  promptly  lived  up  to.  As  it  is  now,  there  are  banks  which 
are  slow  in  forwarding  these  statements,  when  called  upon  by  the 
Comptroller,  and  slow  in  getting  the  abstracts  into  the  papei's  after 
the  retvu-ns  have  been  made. 

The  mention  of  the  papers  reminds  me  of  a  point  which  is  of  interest 
and  that  is  that  these  bank  returns  as  they  are  made  to  the  Comptroller 
of  the  Currency,  and  published  in  abstracts  in  the  newspapers,  are  of 
precious  little  value  to  the  investor  who  is  searching  for  solid  informa- 
tion relative  to  the  condition  of  this  and  that  bank,  whose  shares  he  is 
thinking  of  buying. 

It  is  well  that  these  bald  and  dry  returns  should  be  printed,  since 
notliing  better,  in  their  way,  so  far,  has  been  devised,  but  they  leave 
much  still  mitold  and  uncertain  regarding  the  condition  of  the  bank. 

The  key  to  the  situation  of  a  bank  is  the  real  condition  of  its  loan. 

The  loan  figures  are  the  great  and  all-absorbing  figures  of  these 
statements.  And  it  is  because  these  statements  make  no  attempt  to 
give  any  real  inside  view  of  the  merits  and  demerits  of  the  living  loan. 


THE    book-keeper's    DESK. 


69 


that  they  convey  so  little  valuable  information.  I  can  hardly  see  how 
■we  are  to  expect  anything  more.  No  bank  wishes  to  advertise  its 
weakness.  And,  if  a  bank  is  in  a  bad  way,  it  will  be  the  last  institution 
to  do  this.  Some  of  the  most  cheerful  bank  exhibits  have  been  made 
the  day  before  the  bank  making  them  has  given  up  the  ghost. 

Om-  National  bank  returns  are  not  the  only  ones  which  get  into  the 
papers,  for  this  public  showing  is  considered  a  good  thing  the  banking 
world  over. 

And  there  is  not  much  unlikeness  in  the  form  of  returns  even  from 
opposite  sides  of  the  globe.     Here  are  a  couple  of  "foreigners "  : 

First,  a  Spanish  bank  return  of  to-day  (see  Form  10) ;  yet,  there  it  is 
again — a  big  loan,  about  which  we  are  told  nothing — can  know  nothing. 


Assets. 


Pesetas. 


60,433,167.93 


Pesetas. 

Cash 55,553,623.70 

Bullion    (gold 

and  silver)..     4,878,544.23 
Cash  at  branches  and  ag-'c's    94,520,246.74 

Securities  at  Madrid 585,160,6J7 .  13 

Securities  held  at  branches  108,653,044 .  43 
Landed  and  other  property  7,319,771 .  78 
Amount  to  the  credit  of 
the  Treasury  for  pay- 
ment of  interest  and  re- 
demption of  "billetes 
hipotecarios"  and  obli- 
gations of  the  Bank  and 

Treasury 

Redeemable   debt,  at  4  per 

cent 

National  Treasury— acct. 
of  interest  on  perpetual 
debt,  4  per  cent 3,761,212.18 


12,222,075.00 


Total 872,069,215.19 


Liabilities. 


Capital 

Reserve  fund 

Notes  In  circ'n  at  Madrid    I 

Notesin  circ'n  at  br'nches  * 

Deposits  in  cash  at  Madrid 
and  branches 

Accounts  current  at  Ma- 
drid and  branches 

Dividends 

Profit  and  loss  account  — 

Sundries 

Nation'l  Treasury— results 
of  red'mable  debt's  issue 

Stock  to  be  changed  in  re- 
deemable debt,  at  4  it  — 

Credit  on  abroad  by  agree- 
ment of  28th  May,  1883. . 


Pesetas. 
150,000,000.00 
15,000,000.00 

349,053,475.00 

36,360,758.15 

159,369,656.43 
2,240,049.91 
17,846,087  73 
66,388,681.62 

43,088,809.40 

13,271,252.50 

19,444,444.45 


Total 872,069,215 .  19 


Form  10. 

Then  another — a  return  of  the  condition  of  the  Bank  of  Moscow — 
(see  Form  11)  which  I  obtained  in  London,  and  to  which  I  call  attention 
for  the  purpose  of  showing  that  the  drift  of  the  banks  of  this  country 
towards  a  habit  of  paying  interest  upon  deposits  is  nothing  new  in 
banking  —  that  it  is  everywhere  in  Europe  a  common  thing  with 
stock  banks. 

This  practice,  which  I  personally  observed  in  London,  extends  from 
London  to  Moscow. 

The  rouble  of  Russia — the  standard  rouble,  which  is  the  silver  one 
— is  of  75  cents  value.  The  capital  of  the  bank  of  tliis  statement  is 
therefore  tliree  milUon  dollars. 

But  the  statement  shows  that  it  indulges  quite  extensively  in  the 
luxury  of  hiring  deposits,  and  does,  as  a  result,  a  large  business  on  its 
comparatively  moderate  capital— a  business  whose  extent  is  clearly 
shown  in  the  loan  figures. 

A  curious  item  in  this  return  is  that  of  protested  bills,  which  amount 


70 


PRACTICAL  BAXKIXG. 


to  about  675,000,  showing  the  bank  has  been  passing  through  some  very- 
hard  days. 

^  MOSCOW  DISCOUNT  BANK,  MOSCOW. 


Assets. 

Roubles.  §• 

1               Liabilities. 

Roubles.    §• 

6 

Cash  in  hand 

622,341  84 

1,070,420  47 

10,000  00 

9,732  42 

6,911,364  93 

5,729,394  20 

1,469,117  30 
310,117  66 

104,103  35 

139,922  92 

6,734  50 

347,138  97 

Capital  paid  up 

Reserve  fund. 

4,000,000  00 
647,971  78 

Cash  at  bankers 

Treasury  bonds  at  short  dates 
State  bank  receipts 

Deposits: 

(a)  In  current  ac- 
counts  6,033,747  48 

Ob)  At   call    and 

short  notice.    130,587  43 

(c)  For  fixed  pe- 
riods  3,298,637  53 

Bills  discounted : 

(a)  Bills  with  sev- 
eral endorse- 
ments  6,287,864  93 

(h)  Bills  with  one 

9,461,972  43 

signature 
affainst  addi- 
tional secur- 
its'  in  stocks 
and  shares..    623,400  00 

Bills  rediscounted 

1,014,506  78 

500  00 

658,529  44 

14,123  50 

Special  account  with  State 

Bank  against  bill  depot. . 

Foreign  account 

Advances  on  securities 

Government  and  otherstock 
bearing  interest 

Unclaimed  account 

Interest  on  deposits 

80,207  97 

Interest,  commission,  etc., 
for  1884 

811,225  01 

Protested  bills : 

(a)  Billswith  sev- 

eral endorse- 
ments      44,102  35 

(b)  Bills  with  one 

signature 
against  addi- 
tional secur- 
ity in  stocks 
and  shares..     60,000  00 

Sundry  creditors 

41,250  65 

Mercantile  expenses  to  date. 

Furniture  and  fixtures 

Sundry  debtors 

16,730,287  56 

16,730,287  56 

Form  11. 

The  English  bank  returns  are  made  after  the  same  general  form  as 
those  of  the  National  banks  of  this  country ;  or,  it  might  be  more  proper 
to  say  that  our  returns,  like  very  many  business  ideas,  are  copied  after 
the  English.  There  was  a  time  when  the  Bank  of  England,  which  now 
publishes  a  weekly  statement  of  its  condition,  made  no  public  showing 
of  any  description  whatever,  and  would  not  even  do  so  when  called 
upon  for  such  by  the  Government  and  Parliament.  The  English 
authorities  are  now  exceedingly  strict  in  requning  that  returns  of  the 
banks  shall  be  made  in  regular  form  and  at  the  right  time.  All  limited 
English  banks  are  required  to  post  in  their  registered  offices  on  the 
first  Monday  of  February  in  each  year  a  complete  statement  of  their 
habilities  and  assets.  An  instance  occurred  of  recent  date  where  a 
London  bank  was  arrested,  as  it  were,  and  dragged  into  the  Municipal 
Court  at  Westminster  for  violating  this  return  law  (Act  of  1862),  and 
though  the  bank  proved  that  it  had  posted  in  all  its  offices  at  the  date 
required  balance  sheets  giving  more  than  the  information  demanded 
by  law,  but  not  in  regular  form,  it  was  fined  £5,  and  each  Director 


THE    book-keeper's    DESK.  71 

fined  40  shillings,  one-half  the  penalties  going  to  the  informer,  wno  in 
this  case  happened  to  be  a  man  who  was  endeavoring  to  levy  black-mail 
upon  tlie  bank,  professing  to  have  information  of  value  which  he  would 
sell  to  them  for  £1,000. 

I  found  also  that  they  had  a  similar  law  in  force  for  the  savings 
banks  and  every  bank  of  this  sort  was,  by  law,  obliged  to  post  in  its 
rooms,  as  often  as  once  a  week,  a  statement  of  its  condition — a  regular 
trial  balance  of  the  concern — ^whieh  was  placed  where  the  public  could 
read  and  study  it. 

In  some  quarters  in  this  country,  it  is  the  custom  of  saXdngs  banks 
to  post  statements  after  the  Enghsh  custom,  and  it  might  possibly  be 
well  to  have  in  force  a  law  requiring  such  action  on  the  part  of  all 
savings  institutions. 

It  might  also  be  well  to  have  statutes  requiring  savings  banks  to 
make  retvu-ns  to  the  press  of  abstracts  of  their  condition  after  the 
National  bank  style. 


73  PRACTICAL    BANKING. 


CHAPTER  V. 

THE  COLLECTION  DEPARTMENT  AND  MESSENGER. 

The  officer  at  the  head  of  this  department  is  naturally  termed  the 
Collection  Clerk  and  takes  charge  of  the  paper  which  the  bank  receives 
for  collection  for  account  of  its  depositors,  and  in  some  banks  will  have 
delivered  to  him  for  collection  the  "foreign"  discount  notes  also.  The 
duties  of  the  position  demand  a  man  with  a  clear  head,  a  good  capacity 
for  reckoning  and  writing,  and,  withal,  a  man  of  pleasant  address  and 
good  judgment ;  for,  in  the  discharge  of  his  work,  he  is  brought  in 
direct  contact  with  the  bank's  dealers  and  the  general  public.  There 
are  few  positions  in  a  bank  more  desirable  for  the  young  man  who 
wishes  to  learn  banking.  Here  he  will  find  the  best  of  opportunities 
for  perfecting  himself  in  a  knowledge  of  all  the  laws  and  customs  rela- 
tive to  promissory  notes  and  bills  of  exchange — all  the  rights  and 
duties  of  parties  to  such  papers. 

In  order  to  safely  get  through  the  work  of  his  department,  it  seems 
almost  imperative  that  he  should  inform  himself  thoroughly  on  all  the 
points  last  named ;  and,  in  order  to  do  tliis,  he  will  be  naturally  led 
f roui  the  study  and  practice  before  him  to  a  careful  examination  of  the 
books  which  are  specially  devoted  to  giving  information  relative  to 
notes  and  bills ;  and,  to  keep  posted  up  to  date,  he  should  read  regu- 
larly a  live  periodical  which  deals  with  practical  banking  subjects. 

His  material,  the  grist  which  he  is  to  work  through,  comes  to  hiin 
generally  carefully  invoiced  by  the  bank's  correspondents  and  its 
depositors.  That  is,  it  sliould  be  carefully  invoiced,  but  sometimes 
loose  practices  prevail  among  banks  and  depositors  relative  to  this 
item  of  the  banking  business.  The  dealer,  who  is  very  sure  to  bring 
his  pass-book  with  him  when  he  comes  to  the  bank  to  make  a  deposit, 
and  who  is  never  satisfied  unless  his  deposit  is  at  once  duly  entered  to 
his  credit  on  this  pass-book  by  the  Receiving-Teller,  as  it  should  be, 
will  at  the  same  time  fall  into  the  habit  of  flinging  his  collections  into 
his  bank  without  accompanying  them  with  vouchers,  letters  or  memo- 
randa of  any  sort. 

The  only  proper  way  for  him  to  do  his  collection-depositing  business 
is  to  send  his  maturing  paper  to  the  bank  in  a  formally-written  letter, 
of  which  he  has  retained  a  copy,  and  it  is  well  for  the  bank  to  give 
him  formal  acknowledgements  of  these  letters,  stating  that  they  were 
received  with  enclosures  as  described. 

In  cases  where  a  careless  way  of  leaving  collections  is  practised 


THE    COLLECTION   DEPARTMENT    AND    MESSENGER. 


73 


complications  may  in  time  arise.  The  collection  paper,  which  might 
have  been  left  unlisted  and  unacknowledged  at  the  bank,  may  be  lost 
or  mislaid.  When  thus  failing  to  appear  the  bank  will  be  confident  it 
was  never  left  with  it  at  all,  while  the  depositor  is  equally  sure  that  he 
deposited  it.     What  if  the  paper  never  turns  up  to  settle  the  dispute? 

Another  point  which  should  be  covered  when  the  paper  is  taken  on 
is  the  question  of  whether,  if  not  paid  at  maturity,  it  shall  be  protested. 

Quite  possibly  the  OAvner  would  not  care  to  have  the  piece  saddled 
with  protest  fees  which  may  have  to  come  from  his  own  pocket,  but 
unless  he  has  guarded  against  this  contingency  by  "  no  protest "  instruc- 
tions when  he  deposited  the  paper,  the  bank  has  no  discretion  and  to 
the  notary  it  goes  to  the  dissatisfaction  of  all  parties — except  the  latter. 

But  we  may  imagine  that  the  notes  and  drafts  have  come  into  his 
hands  with  proper  description  and  instructions  from  their  o^^^le^s, 
that  he  has  receipted  on  the  letters  for  the  items  which  he  has  taken 
and  is  ready  to  make  the  records  which  ensure  a  safe  management  of  his 
department  and  a  con-ect  disposition  of  the  proceeds  of  his  collections. 

His  first  record  is  of  those  drafts  which  are  to  be  taken  out  by  the 
Messenger  and  presented  for  acceptance  or  payment.  This  is  a  simple 
matter,  the  record  being  brief,  but  including  always  a  memorandum 
of  the  owner  of  the  paper  so  that  it  can  be  properly  credited  when  the 
Messenger  returns  with  the  funds  representing  paid  and  delivered  drafts. 

Those  pieces  wliich  are  not  to  go  into  the  hands  of  the  Messenger, 
because  not  yet  due,  or  which  the  Messenger  brings  back  from  his  trip 
accepted  ar  d  due  m  the  future,  will  be  covered. 

Given  below  are  two  specimens  of  note-coveriag.     (See  Form  12.) 


7?    ^ 


(^c^V^ 

0 

Form  12. 

The  above  note-covers  (5  and  7)  are  of  a  sort  which  I  have  seen 


74 


PRACTICAL    BAXKIXG. 


in  use  in  a  large  bank,  and  which  1  here  give  as  specimens  of  covers 
that  are  not  well  arranged,  since  on  them  the  points  most  important 
axe  set  dowai  in  the  least  prominent  iilace. 

The  forms  below  comprise  the  best  I  have  found  in  use  in  banks : 


NEVV   YORK 

^  'OO. 


J 


C^^.  <^/j-/-. 


^oo. 


# 


^y  Y^orce.s  t er,M.s. 


4> 


Ci^Cf. 


^-<-^^/ 


V 


qT-^ 


H^ 


Form  13, 
(1.)  A  cover  of  an  acceptance  <lue  f)ut  ol'  town.    (3.)  Cover  of  a  note  due  out  of 
town.    (3.)  Cover  of  a  note  due  in  place  where  the  bank  is  located.    (4.)  Cover  of  aa 
acceptance  of  same  character. 


THE    COLLECTIOX    DEPAUTMEXT    AXD    MESSENGER. 


O 
Cr- 


X3 


^^ 


^-     . 


^v 


I 


T 


w 


^ 

^ 


R 


2  o 


Sh 


^o 


a:  a 


O  ■•■«'  fc, 

2=^  as 


dot: 


sions  of  the  collection  business  of  the 


On  each  of  these  covers 
there  are  found :  first,  the  time 
and  place  of  maturity;  next, 
the  name  of  the  promisor  or 
acceptor,  with  tlie  date,  time 
and  amount  of  the  paper  im- 
mediately under;  and,  below 
all,  the  names  of  the  owners 
of  the  paper. 

On  covers  of  the  paper  pay- 
able out  of  town  all  the  names 
upon  the  paper  had  better  be 
recorded. 

The  first  and  most  important 
duties  coming  up  m  covering  a 
note  are  to  get  the  time  and 
place  of  payment  rightly  noted. 
Mistakes  here  are  the  mistakes 
that  are  very  often  leading 
banks  into  serious  trouble. 

Some  banks  do  not  use 
covers  but  keep  the  collection 
paper  in  large  pocket-books  in 
the  manner  I  describe  in  the 
chapter  on  discounting. 

Whether  covered  or  not 
they  must  be  entered  on  a  Col- 
lection Record  which  is  the 
main  book  of  the  department. 
Here  they  are  entered  in  the 
order  of  their  maturities.  I 
know  of  no  better  form  for 
this  book  than  this  (See  Form 
14)  which  is  a  copy  of  one  long 
in  use  in  a  bank  doing  a  very 
heavy  collection  business. 

It  is  an  excellent  plan  to 
record  the  notes  direct  fi'om 
their  face,  since  an  after-com- 
parison with  the  covers  will 
then  prove  a  safeguard. 

The  space  to  be  left  on  the 
record  book  for  the  coming 
months  and  days  is  to  be  gaug- 
ed, of  course,  by  the  dimen- 
bank.     Some  banks  may  not 


76 


PRACTICAL   BANKIjVG. 


have  more  than  one  or  two  collection  notes  due  a  day.  I  have  known 
a  bank  to  have  1,200  maturmg  in  one  day,  80  of  which  were  given  to 
the  notary  to  protest. 

As  the  paper  matures  and  is  brought  out  for  payment  a  systematic 
Collection  Clerk  will  promptly  see  that  every  one  of  his  covers  is 
received  back  fi-om  the  Recei\'ing  -  Teller  (or  Note -Teller)  and  dis- 
charged from  tliis  record  book  ;  and  he  cannot  properly  discharge 
these  covers  until  he  has  seen  by  the  entries  upon  the  credit  books  of 
the  bank  that  those  which  are  reported  paid  have  been  duly  credited 
to  their  owners. 

The  utmost  care  should  be  taken  that  no  cover  gets  treated  as  dis- 
charged and  settled  and  finally  filed  away  with  an  unpaid  note  inside 
it.  It  is  hard  to  imagine  a  more  troublesome  mistake  than  that  might 
prove  to  be. 

Several  forms  of  notices  are  included  in  the  stationery  belonging  to 
this  department  and  the  manner  of  attention  to  such  minor  points  as 
these  often  clearly  shows  the  character  and  style  of  the  administration 
of  the  affairs  of  a  bank. 

In  the  first  place,  they  should  be  neatly  and  tastefully  printed,  on 
good  paper  of  the  right  shape  and  size,  and  should  be  clearly  and  cor- 
rectly expressed. 

I  here  give  some  very  good  forms  (See  Forms  15  and  16)  in  actual 
use  by  one  of  our  best-managed  banks,  and  which,  with  trifiiiig  changes, 
to  suit  banks  having  only  one  Teller,  etc. ,  can  be  adopted  by  any  bank : 


FIRST  NATIONAL  BANK  OF  BOSTON. 
No,  140  State  Street, 189 


Your  Note  for  Dollars  Cents  is  due  this  day,  and  you 

are  requested  to  pay  the  same  to  the  PAYING  TELLER. 

J.  JONES,  Cashier. 


UJ 
►  LU 
OCA 


Boston, J  89 

Please  call  at  EI^T  jV;^TIG]SI^Il   WW  and  accept  a 
Draft  by upon  you  at for Dollars Cents, 

J,  JONES,  Cashier. 


THE    COLLECTION   DEPARTMENT   AND    MESSENGER. 


7T 


V  -A- 


*  H  • 
-♦f  g  * 

*  M  * 
->f  H  • 

*  =«  • 

*  s  * 

*  !5  • 

*  H  • 

*  ««  • 

•k  ®  -A- 

I  ■*  I 

*  »-i  * 

*  «  ♦ 

*  *  ♦ 


'-ad^i^'yn, 


.JS' 


7 


You  are  requested  to  pay  your  NOTE  for  Dollars 

cts.  due  this  day,  to  the  Receiytng  Teller  of  the 

FIRST  NATIONAL  BANK. 

J.  JONES,  Cashier. 


OOGOO 


(I  « 


:o 

io 

'O 

o 
o 
o 
c 

'o 
c 
o 
o 
o 
c 
o 

-o 
ooooo 


A 

c! 

Oi 

o  * 
o  © 

O'  "* 


Boston„ 


.189 


You  are  requested  to  pay  your  ACCEPTANCE  for 
Dollars        cts.  due  this  day,  to  the  Receiving  Teller,  at  the 
FIRST   NATIONAL  BANK. 

J.  JONES,  Cashier. 


Form  16. 

If  you  are  so  located  as  to  be  obliged  to  notify  parties  who  are  not 
entirely  familiar  with  the  routine  of  banking  business  you  may  wish  to 
add  to  your  notice  (as  per  Form  17)  the  point  of  days  of  grace,  which 
rehc  of  old  times  is  still  a  cause  of  much  confusion : 


TIIS;  FIRST  NA  TIONAL  BANK, 

To _ 


Your . 


....  for Dollars 


becomes  due  at  this  Bank 18 

which  is  the  last  day  of  grace. 

RiVTT    (  From  9  A.  M.  to  12  SI. 
„niiR«.1  From  1  P.  M.  to  3  P.  M. 
nuuivs.  (Saturday  afternoons  not  opened.  J.  F.  JONES,  Cashier. 


Form  17. 

Below  is  a  curiosity  in  the  shape  of  a  very  old-fasliioned  bank  notice, 
which  shows  how  these  things  were  gotten  up  m  the  days  of  our  fathers : 


Boston,  Nov.  17, 1831. 

Your  note  for                           Dollars  and 

Cents,  lodged  for  collection. 

and  you  are  requested  to  paj'  the  same. 

GEO.  HOMER,  Cashier. 

78  PRACTICAL    BANKING. 

Next  after  having  a  good  form  comes  the  duty  of  fining  it  out 
correctly  and  delivering  it  properly  both  as  to  place  and  time. 

Banks  are  not,  by  law,  obliged  to  send  notices  to  the  makers  of 
maturing  promises  held  by  them  for  collection  or  under  discount.  Yet 
the  custom  of  doing  so  is,  in  the  States,  universal,  and  about  as 
binding  as  a  legal  statute. 

Wlien  a  party  signs  a  promise  to  pay,  he  should  be  careful  to  make 
the  promise  payable  at  some  specific  point  ;  and,  at  its  maturity,  make 
himself  there,  money  in  hand,  to  pay  it,  notice  or  no  notice. 

But,  the  bank  having  undertaken  to  do  this  notifyhig,  and  placed 
the  makers  of  the  paper  in  expectation  of  being  told  when  and  where 
to  meet  their  notes  and  acceptances,  should  attend  to  the  business 
carefully  and  promptly. 

Any  failure  to  do  so  is  neglect  and  carelessness,  and  is  likely  to 
bring  to  note-signers  and  banks  annoyance  and  perhaps  loss. 

There  is  one  system  of  making  out  and  dehvering  these  notices  that 
has  many  points  in  its  favor,  Avhieh  is  to  have  all  the  notices  made  out 
at  the  time  the  paper  is  received  into  the  discount  and  collection 
departments,  without  regard  to  the  fact  that  the  time  of  maturity  is 
yet  a  great  way  off.  Keep  the  notices  on  file  in  the  order  of  their 
maturities  and  deliver  them  as  the  maturities  draw  reasonably  near. 
This  plan  has  several  advantages.  With  the  notices  before  him  at  all 
times,  the  Messenger  can  mail  and  deliver  at  his  o\vn  convenience  and 
fully  avail  himself  of  wholesale  deliveries — that  is,  can  pick  from  his 
file  many  notices  for  one  house  and  deliver  them  in  a  lump.  Then 
under  this  system  the  notices  can  most  readily  be  made  out  direct 
from  the  face  of  the  paper  and  not  from  covers  or  records  ;  and  by  so 
doing  notices  which  have  been  correctly  drawn  may  correct  eiTors  in 
filing  or  covering. 

A  point  which  bank  officers  are  often  at  a  loss  to  decide  is  the  question 
whether  to  send  notice  of  a  note  written  payable  at  a  bank  to  that  bank 
or  direct  to  the  promisor.  There  is  no  general  rule  with  the  banks  iiy,  this 
respect.  In  their  action  they  are  apt  to  be  governed  by  ch-cumstanees 
and  a  previous  knowledge  of  what  the  promisor  would  like  and  expect. 
In  view  of  this  absence  of  rule  and  custom  it  would  be  well  if  all 
promisors  would  minute  on  the  margin  of  their  notes  the  point  to 
which  they  would  prefer  the  notices  to  be  sent — whether  to  the  bank 
where  they  are  payable  or  to  their  place  of  business. 

There  Avas  at  one  time  in  vogue  with  our  banks  a  curious  old  custom, 
an  English  importation,  of  keeping  a  notification  record  book.  Tliis 
book  was  kept  by  the  Messenger.  In  it  he  recorded  just  how  and  where 
he  delivei'ed  all  his  notices  of  maturing  paper.  I  have  h.id  oppor- 
tunities of  looking  into  one  of  these  ancient  record  books.  In  it  were 
the  most  minute  statements  of  the  way  the  Messenger  had  scattered 
his  notices.  In  one  line  would  be  a  record  of  a  notice  left  at  the  place 
•of  business  of  feome  promisor  whose  office  was  shut,  which  obUged 


THE    COLLECTIOX   DEPARTMENT   AND    MESSENGER.  79 

the  Messenger  to  shove  the  missive  under  the  door.  Another  minute 
would  be  to  the  effect  that  a  certain  promisor's  place  of  business  could 
not  be  found,  and  that  his  due  notice  was  delivered  at  his  house  in 
such  a  street  at  a  time  of  day  named.  And  so  the  records  ran  along. 
This  book,  and  these  methods,  show  that  more  care  was  taken  in  the 
old  days  in  the  matter  of  delivering  notices  to  call  and  pay  than  at  the 
present  time. 

THE   MESSENGER   AND    HIS    COLLECTION    DUTIES. 

A  Messenger  is  sure  to  be  found  on  the  staff  of  banks  which  have 
many  departments  of  work  and  a  number  of  officers.  In  fact,  almost 
all  banks,  small  as  well  as  large,  are  apt  to  have  a  Messenger  even  if 
they  double  up  in  some  departments  and  run  along  on  a  Umited  corps 
of  clerks.  Some  of  the  great  banks  in  the  Clearing-House  cities  have 
a  large  number  of  Messengers,  and  there  are  several  which  have  at 
least  a  dozen.  The  duties  of  this  officer  vary  with  the  circumstances 
under  which  he  labors.  In  some  banks  he  may  give  his  whole  time  to 
what  may  be  termed  legitimate  Messenger  work — presenting  drafts, 
delivering  notices,  making  cash  collections  on  coupons,  drafts,  etc. ,  and 
doing  the  bank's  post-office  business  in  the  town  or  city  where  it  is 
situated.  The  Messenger  in  a  small  bank  ha\'ing  no  janitor  opens  the 
doors  in  the  morning,  closes  them  at  night,  takes  care  of  the  rooms  and 
does  all  the  outside  eiTands.  Honesty,  accuracy  and  abUity  are 
qualifications  essential  for  the  proper  discharge  of  the  duties  of  the 
position. 

Many  faithful  Messengers  are  doing  good  service  who  entered  into 
the  work  when  matiu-e  in  years,  having  spent  a  large  portion  of  their 
lives  in  other  occupations  from  which  they  have  turned  to  banking 
when  unable  to  seciire  employment  at  theh  trade.  Men  of  this  class 
are  generally  content  to  work  without  the  wish  or  hope  for  promotion, 
since  their  ambition  in  Ufe  as  well  as  capacity  for  gettmg  on  have  been 
somewhat  weakened  by  service  and  disappointment  elsewhere.  Other 
Messengers  are  alert  and  bright  young  men  who  have  gladly  stepped  on 
to  this  lower  round  of  the  bank  ladder  ^vith  the  determination  to  spring 
to  a  higher  rung  at  the  earhest  opportunity. 

The  position  has  many  advantages,  viewed  as  a  school  of  preparation 
for  higher  duties,  and  any  young  bank  Messenger  may  reasonably  hope 
to  secure  rapid  promotion  if  he  does  his  duty  and  avails  himself  of  every 
opportunity  of  qualification  for  a  liigher  place — that  is,  provided  he 
has  natural  fitness  for  the  banking  business.  If  he  has  not  he  is  pretty 
sure  to  remain  in  the  first  place  he  is  put  on  entering  a  bank.  Prompt- 
ness, carefulness  and  courtesy  are  highly  desirable  traits  in  a  bank 
Messenger. 

I  interpolate  these  few  words  on  Messengers  in  general  right  here, 
because  I  want  to  speak  next  of  the  Messenger's  part  of  the  collection 
work  and  of  the  varying  forms  of  the  business  paper  which  he  has  to 
handle — and  handle  intelligently.     Of  coui-se,  he  has  behind  him  and 


80  PKACTICAIi  BANKING. 

overlooking  him  the  clear-headed  Colleetion  Clerk,  but  there  is  abundant 
room  for  the  Messenger  to  exercise  care  and  use  iiis  acquired  knowledge. 

In  presenting  drafts  for  acceptance  or  payment,  it  is  always 
extremely  desirable  that  the  drawees  shall  be  found  in  person — that 
the  papers  shall  be  actually  presented  to,  and  seen  by,  the  parties  upon 
whom  they  are  drawn,  and  some  sort  of  answer  to  them  secured  at  the 
earhest  possible  moment. 

If  the  parties  positively  decline  to  honor  the  paper  it  is  an  excellent 
plan  to  have  them  jot  down  themselves  a  simple  statement  of  the 
reasons  for  their  refusal.  Such  explanatory  answers,  noted  in  the 
drawee's  own  handwriting,  prevent  a  vast  amount  of  misrepresentation 
and  misunderstandhig,  and  are  very  valuable  and  convenient  for 
return  to  depositors  and  correspondents  who  have  sent  in  the  paper  for 
collection. 

In  the  everyday  collection  work  of  a  large  bank  singular  answers  of 
the  class  we  have  suggested  as  being  desirable  are  often  turning  up. 
Here  is  an  illustration  of  this  point  : 

The  amount  of  the  di-aft  was  |3.  It  came  all  the  way  from  an 
interior  bank  in  Pennsylvania,  through  a  New  York  bank,  i  o  a  Boston 
bank,  for  coUection.  It  was  drawn  at  sight,  and  bore  several  endorse- 
ments. It  was  drawn  on  a  bill  of  lading  of  a  small  lot  of  bottles.  The 
Messenger  found  the  bottle  man — the  drawee.  He  refused  to  accept  or 
pay  the  Messenger,  and  said  he  would  note  his  refusal  reasons  on  the 
back  of  the  draft.  This  he  did  by  writing  as  follows,  on  the  back  of 
the  draft,  saying  as  he  finished,  after  long  struggles  over  the  woi-k  of 
composition,  that  he  would  have  written  more  if  there  had  been  room, 
on  the  draft  :  '  <  Boston,  August  25th,  1S90. 

' '  Birmingham  Dear  Sir :  your  Botles  was  to  he  delivered  to  me  free  of 
expence,  whitch  thair  was  and  expence  of  SO  cts  and  9  brocken  ones  I  icill  pay 
tow  dollars  and  know  more.  "  Phineas  Johnson.  ' 

In  Massachusetts,  and,  I  think,  in  most  States,  di'awees  have  24 
hours  in  which  to  decide  whether  or  not  they  will  honor  drafts  drawn 
upon  time.  This  24  hours'  grace  is  a  notion  that  we  have  copied  from 
Enghsh  banking  and  business  practice,  and  is  based  upon  sensible  ideas. 
It  has  been  adopted  mainly  for  the  purpose  of  giving  di'awees  time  to 
examine  goods,  books  and  invoices. 

When  a  time  draft,  drawn  payable  from  sight,  is  accepted  at  the 
expiration  of  these  24  hours,  the  acceptance  must  date  from  the  day  of 
first  presentation. 

With  drafts  payable  on  demand,  a  settlement  before  the  close  of 
banking  hours  (on  the  day  they  are  presented)  covers  the  requirement. 

In  case  of  absence  of  drawees,  a  presentation  at  their  places  of 
business,  and  the  leaving  there  of  the  draft,  or  a  notice  of  it,  is,  of 
course,  sufficient. 

Still,  my  ad\ace  to  the  Messengers  is  always  to  see  their  men  person- 
ally, and  get  direct  answers  from  them  if  such  a  thing  is  possible. 


THE    COLLECTION    DEPARTMENT    AND    MESSENGER.  81 

Misunderstaxidings,  fault-finding  and  losses  are  by  such  a  course  often 
avoided. 

And  the  Messenger  should  always  remember  to  give  just  as  much 
care,  system  and  consideration  to  the  smallest  draft  as  to  the  largest, 
and  should  be  just  as  particular  and  just  as  courteous  in  liis  dealings 
with  those  drawees  whose  business  may  seem  to  liim  insignificant  as 
with  his  heaviest  customers. 

It  was  a  draft  on  New  York  for  $25,  drawn  at  sight,  by  some  party 
way  otf  in  the  West,  upon  a  man  the  Messenger  had  never  heard  of. 
The  Messenger  turned  to  the  directory  and  found  the  name  and  location 
of  the  drawee.  On  calling  on  this  address,  he  did  not  find  the  drawee 
in,  and  found  that  he  had  only  desk  room  there,  and  somebody  in  the 
same  room  told  the  Messenger  that  his  man  was  out  of  town  and 
might  not  be  back  for  many  days.  The  Messenger  made  no  further 
endeavors  to  collect  the  draft — may  even  have  neglected  to  leave  a 
notice  of  it — and  it  went  to  protest. 

A  few  days  after  a  most  excellent  man,  who  turned  out  to  be  the 
drawee  on  tliis  draft,  called,  saying  he  had  heard  of  the  protest,  but 
had  neither  seen  nor  heard  of  the  demand  on  him  until  he  received 
notices  of  protest.  Said  the  Messenger  ccaild  not  have  searched  for  him 
properly  or  made  a  due  presentation.  Was  sorry  for  the  affair,  because 
the  non-payment  of  the  draft  had  cost  him  several  hundred  dollars, 
since  it  was  a  bill  for  a  portion  of  taxes  upon  Western  lands,  the  non- 
payment having  led  to  their  sale  for  taxes  and  loss  to  him  as  specified. 

A  valued  correspondent  has  suggested  that  I  say  a  wc/d  or  two  for 
the  benefit  of  drawees  and  regarding  some  of  their  duties  in  the  matter 
of  responding  to  the  paper  which  is  drawn  upon  them. 

He  agrees  with  me  in  pressing  upon  bank  messengers  and  notaries 
the  great  desirability  of  seeing  personally,  if  possible,  the  parties  upon 
whom  drafts  for  acceptance  or  payment  are  draAva;  yet  he  tliinks 
drawees  ought  to  be  forcibly  reminded  of  their  bounden  duty  in  the 
premises.  And  one  of  the  most  prominent  of  these,  is  the  duty  of  being 
on  hand  at  their  regular  places  of  business,  during  legitimate  business 
hours,  to  attend  to  the  drafts  which  advices  have  told  them  are  hable 
to  be  presented  to  them. 

There  are  two  standing  grievances  which  bank  messengers  have 
against  many  business  men.  One  is  their  chronic  habit  of  being  absent 
from  their  ofiices  when  they  are  wanted  to  settle  drafts  drawn  upon 
them,  and  the  other  is  their  careless  custom  of  not  promptly  making 
returns  to  the  collecting  bank,  within  the  legal  time,  upon  the  drafts 
which  have  by  courtesy  been  left  at  their  places  of  business  during 
their  absence.  I  have  purposely  said  "left  by  courtesy,"  because, 
after  a  due  presentation  of  a  draft,  at  a  di-awee's  oflBce,  the  bank  Mes- 
senger has  done  his  duty  if,  in  the  absence  of  the  drawee,  he  leaves 
notice  and  takes  his  draft  back  to  his  bank. 

But,  if  by  courtesy  he  leaves  an  unsettled  draft  and  notice  with  the 


82  PRACTICAL    BAXKIXQ. 

drawee,  it  is  the  duty  of  the  drawee  to  make  returns  upon  it  within 
the  legal  time.  And  if  he  has,  by  constant  neglect  of  this  duty,  put 
the  Messenger  to  the  trouble  of  steadily  going  a  second  tune  for  drafts, 
he  has  no  reason  to  complain  if  the  Messenger  concludes  to  leave  no 
more  unsettled  drafts  at  that  office. 

The  following  incident  may  illustrate  a  third  point  in  the  matter  of 
dealmg  with  the  Messenger : 

A  Messenger  was  handed  by  the  Collection  Clerk  a  sight  draft  upon 
a  well-known  lawyer,  which  he  was  instructed  to  collect  or  get  ac- 
cepted, for  sight  drafts  in  the  locahty  of  this  banking  incident  carry 
grace.  He  took  out  the  paper  on  liis  morning  route,  and  in  due  time 
found  himself  doing  as  he  had  been  instructed — presenting  the  draft 
hi  question  to  the  famous  lawyer.  This  drawee  did  not  seem  pleased 
with  the  sight  of  it ;  in  fact  seemed  to  look  upon  its  very  polite  pre- 
sentation by  the  bank  Messenger  as  an  unwarrantable  intrusion  if  not 
an  actual  uupertinence ;  and  the  only  response  he  offered  was  in  the 
shape  of  a  gruff  enquiry  of  what  he  wanted  to  have  done  about  the  thing, 
anyway.  The  tones  of  the  drawee  were  so  overpoweringly  forbidding 
so  hke  muttered  thunder — that  the  Messsenger,  who  knew  very  well 
who  he  was  interviewing,  could  barely  muster  courage  to  tell  him 
that  he  would  be  pleased  to  have  him  either  accept  or  pay  that  draft. 
Even  this  simple  reminder  was  too  much  for  the  equanhnity  of  the 
lawyea*.  This  being  asked  to  respond — to  pay — by  a  bank  runner  was 
to  his  mind  something  not  to  be  tolerated.  What  ensued  is  best  given 
in  the  language  of  that  bank  Messenger.  "I  am,''  says  he,  "the  very 
anan  who  was  kicked  out  of  the  office  of  Daniel  Webster  for  asking 
him  to  accept  or  pay  a  draft."  The  Messenger  is  a  man  of  fine  imagin- 
ation. He  did  not  mean  to  have  it  understood  that  there  was  actual 
physical  force  used  in  refusing  to  respond  to  that  paper ;  but  he  does 
mean  to  say  that  he  was  ordered  out  of  that  drawee's  office  by  a  man- 
ner so  peremptory  that  it  seemed  to  him  about  equivalent  to  a 
forcible  ejection.  Those  who  have  seen  Daniel  Webster  in  a  dis- 
pleased mood  will  understand  the  situation. 

The  terms  in  wliicli  drafts  are  drawn  often  vary  widely  from  the 
ordinary  forms  and  these  variations  or  other  circumstances  continually 
call  for  decisions  from  those  in  authority  as  to  the  proper  course  to 
pursue. 

Here  is  a  novel  form  of  a  time  draft,  which  some  drawer,  with 
original  ideas  on  the  subject  of  draft  drawing,  has  framed.  As  it 
happens  to  come  through  my  hands  for  collection,  I  am  called  upon  to 
settle  its  bearings.  It  reads  thus  :  "On  demand,  fifteen  days  after 
date,  please  pay  to  order,"  etc.  We  present  it  to  the  drawee  for 
acceptance.  He  happens  to  decline  to  honor  it,  on  account  of  the 
incorrectness  of  its  amount,  and  now  the  question  comes  up  whether 
we  have  a  right  to  make  an  immediate  presentation  of  a  draft  written 
as  this  is  "  on  demand  fifteen  days  after  date  " — a  time  yet  a  long  way 


THE    COLLECTION    DEPARTMENT    AND    MESSENGER.  83 

ofE,  and  whether,  having  presented  it,  and  failed  to  get  it  accepted,  we 
have  a  legal  right  to  protest  it  at  once  for  non-acceptance. 

There  is,  at  first  sight,  an  impression  conveyed  by  a  draft  thus 
drawn  that  the  drawer  did  not  intend  that  it  should  be  presented  till 
fifteen  days  after  date,  and  that  Ave  really  have  no  right  to  present  or 
protest  it  for  non-acceptance  till  that  time.  After  due  consideration, 
the  conclusion  is  reached  that  the  only  safe  way  is  to  make  an 
immediate  presentation,  and  protest  at  once  if  not  accepted. 

Another  conclusion  is  also  reached  at  the  same  time,  which  is  that 
it  is  a  very  poor  plan  for  anybody  to  draw  a  draft  in  this  ambiguous 
way. 

There  is  a  second  question  which  also  comes  up  in  connection  with 
this  draft.  It  is  payable  at  a  point  where  gi*ace  exists,  and  the  question 
now  is  whether  a  draft  payable  "on  demand  fifteen  days  after  date '' 
carries  grace.     This  question  is  quickly  decided  in  the  negative. 

Curiously  enough,  to  add  to  the  complications  of  this  draft  even  a 
third  question  attaches  to  it.  It  is  drawn  on  J.  Robinson  &  Co.  It 
should  have  been  on  J.  W.  Robinson  &  Co.  The  goods  which  it  covers 
were  thus  consigned.  There  is  no  J.  Robinson  &  Co.  in  the  place,  and 
J.  W.  Robinson  &  Co.  fully  recognize  that  the  draft  is  for  them. 

Some  bank  has  told  the  drawees  that  if  they  accept  they  must 
accept  as  drawn — not  accept  by  writing  the  correct  name  of  their  firm 
across  the  face  of  the  draft,  but  accept  by  putting  on  the  name  of  a 
firm  which  does  not  exist  simply  because  the  drawer  has  so  written  it. 

This  is  all  Avrong.  No  matter  how  the  draft  may  be  drawn,  the 
drawee  who  accepts  must  accept  in  his  correct  name. 

We  have  often  heard  payees  of  checks,  which  had  been  filled  up 
incorrectly,  in  the  matter  of  the  name  of  the  payee,  advised  to  write 
their  names  to  agree  with  the  face  of  the  check.  This  is  very  poor 
advice.  An  individual  or  firm  should  never  vary  signatures  in  this 
way,  even  m  the  slightest  point. 

Here  is  another  illustration. 

The  bank  received,  in  due  course  of  business,  from  a  distant  corres- 
pondent, a  draft  for  collection,  with  a  bill  of  lading  of  some  hundreds 
of  bushels  of  potatoes  attached,  which  read  pay  so  many  hundred 
dollars  "ow  arrival  of  the  potatoes,''''  and  which  was  drawn  upon  the 
captain  of  the  potato  schooner.  The  Collection-Clerk  of  the  bank 
receiWng  this  potato-timed  draft,  whose  maturity  was  to  be  determined 
by  the  arrival  of  the  schooner  with  the  potatoes  described  in  the  bill  of 
lading  accompanying  it,  took  chai-ge  of  the  paper,  and  at  once  began 
to  watch  carefully,  with  the  assistance  of  his  Messenger,  for  the  coming 
schooner.  Considerable  time  elapsed  and  nothing  was  seen  or  heard 
by  the  bank  of  the  drawee  or  his  consignment.  Meantime,  it  appears 
that  the  schooner  had  really  got  in,  unobserved,  discharged  her  cargo, 
in  a  perishing  condition,  and,  with  the  drawee  captain,  sailed  away 
again.     In  the  end,  the  draft  remaining  uncollected,  and  the  potatoes 


84  PRACTICAL   BAIfKING. 

going  to  complete  ruin,  the  bank  which  forwarded  the  paper  for  collec- 
tion took  the  ground  that  their  collecting  bank  had  not  exercised  due 
diligence  in  the  matter — had  been  guilty  of  carelessness  and  neglect — 
and  charged  them  with  its  full  amount  Avhich  amount  this  collecting 
bank  finally  allowed  its  correspondent. 

There  could  not  well  be  a  more  awkward  position  for  a  bank 
Messenger  to  occupy  than  that  of  a  searcher  after  a  drawee  who  was 
afloat  and  liable  to  arrive  and  leave  again  at  any  time.  Nor  could 
there  easily  be  framed  a  more  objectionable  form  of  a  draft  than  the 
one  we  have  here  described  as  payable  upon  the  arrival  of  a  perishable 
cargo  whose  time  of  coming  and  place  of  discharge  was  quite  unknown 
to  the  holders  of  the  paper. 

In  another  case — that  of  a  demand  draft  for  $200,  drawn  by  a  party 
in  Nova  Scotia  upon  a  consignment  of  live  fowl — a  question  came  up 
which  the  parties  considered  a  very  vital  one. 

The  drawee  told  the  Casliier  of  the  large  city  bank  which  held 
the  paper  that  he  could  not  pay  it  because  it  had  been  draAvn  for 
too  large  an  amoiuit.  The  bill  of  lading  was  attached  to  the  draft, 
with  instructions  that  it  must  not  be  dehvered  until  the  paper  was 
paid.  The  cliickens,  which  were  named  in  the  bill  of  lading,  had 
arrived  by  steamer,  and  now  lay  upon  the  wharf  in  their  big  coops. 
As  the  consignee  turned  away  from  the  Cashier,  after  declining  to  have 
anything  to  do  with  the  paper,  he  suddenly  thought  of  a  disagreeable 
feature  of  the  situation,  and  came  back  to  the  banker,  asking  with 
some  Uttle  anxiety,  "  Wliat  Avill  become  of  the  chickens?  ^Vho  will 
feed  them,  and  give  them  water,  since  no  one  will  accept  them?'* 
Here  was  an  unpleasant  dilemma.  The  poor  birds  might  starve  if  the 
draft  went  to  protest.  After  some  little  talk  over  the  complication  the 
drawee  said  he  supposed  the  bank  would  not  consider  it  its  duty  to 
look  after  the  chickens,  and  he  would  therefore  take  the  risk  of  going 
to  the  expense  of  doing  it  himself.  He  might  not  in  the  end  get  his 
pay  out  of  anybody,  but  he  did  not  mean  to  see  the  birds  suffer. 

Quite  often  complications  like  this  arise.  Cases  frequently  occur 
where  drafts  are  drawn  upon  consignments  of  perishable  articles  which 
the  drawees  will  not  take  because  accompanied  with  liabilities  in 
excess  of  their  value.  In  such  eases  the  merchandise  may  go  to  ruin 
while  the  draft  covering  it  is  being  protested  and  returned  to  its  owners 
at  some  distant  point.  A  thoughtful  and  judicious  use  of  the  tele- 
gi-aph  wires  may,  in  some  instances,  save  these  unpleasant  results. 

Still  another  draft,  accompanied  by  a  bill  of  lading  covering  a 
shipment  of  a  lot  of  flour  read  thus:  "  On  arrival  of  goods  please  pay 
to  order  of  First  National  Bank  $1000. "  It  came  forward  for  collec- 
tion, in  due  course,  from  a  bank  in  the  West  to  a  bank  in  an  Eastern 
city  and  was  presented  to  the  drawees,  who  repUed  that  the  goods 
had  not  arrived,  but  that  they  would  pay  it  when  the  goods  did 
come  to  hand,  since  the  paper  was  all  right.     They  further  said  the 


THE    COLLECTION'    DEPARTMENT    AXD    MESSENGER.  8o 

flour  upon  wliich  this  bill  was  drawn  might  not  arrive  for  several 
weeks.  The  draft  bore  several  endorsements,  and  had  been  invoiced 
to  the  collecting  bank  without  any  special  instructions  not  to  protest 
or  to  hold  for  any  time.  Under  these  circumstances  what  was  the 
correct  course  for  the  bank  to  take  with  it  ?  Undoubtedly  it  was  the 
duty  of  the  bank  to  present  it  at  once  for  payment.  If  payment  was 
refused,  under  the  claim  that  the  goods  had  not  arrived,  it  was  the 
duty  of  the  bank  to  obtain  its  acceptance,  which  would  amount  to  a 
guarantee  of  the  drawees  that  it  was  right,  and  that  it  would  be  paid 
by  them  in  accordance  with  the  tenor  of  its  face.  In  the  event  of  a 
refusal  of  the  drawees  either  to  pay  or  accept,  the  holding  bank  should 
protest  for  non-acceptance. 

It  is  far  better  for  all  parties  concerned  that  drafts  should  never  be 
di'awn  in  this  manner — on  this  awkward  time.  The  collection-holding 
bank  has  no  means  of  knowing  when  the  draft  matures — when  the 
goods  arrive — except  from  information  furnished  by  the  parties  upon 
whom  the  draft  is  drawn. 

Under  some  circumstances  banks  would  be  justified  in  refusing  to 
receive  such  paper. 

Perhaps  the  question  arises  fi-om  other  causes  than  the  manner  of 
writing  the  draft. 

A  time  draft  for  $10,000  was  drawn  upon  a  house  in  Chicago  by  a 
person  in  New  York.  In  working  its  way  through  for  collection  it 
passed  into  the  hands  of  a  bank  in  Chicago,  which  presented  it  to  the 
Chicago  drawees  for  acceptance.  The  draft  was  not  di'awn  payable  at 
any  special  point  in  Chicago;  but  the  drawees  in  accepting  made  it 
payable  at  their  own  bank.  The  Messenger  presenting  the  draft 
objected  to  tMs  form  of  acceptance  and  took  the  ground  that  it  was 
■what  is  termed  a  qualified  acceptance  which  changed  the  tenor  of  the 
paper  and  which  he  had  no  right  to  permit.  The  point  was  referred  to 
the  Chicago  bank,  and  the  general  question  of  the  right  of  an  acceptor 
to  alter  the  tenor  of  a  draft  by  accepting  it  with  the  condition  of 
making  it  payable  at  some  bank  or  olfice  was  fully  discussed. 

It  seems  that  the  Enghsh  courts  long  ago  decided  that  alterations  of 
the  character  in  question  could  not  be  permitted  and  that  the  drawee 
of  a  draft  must  accept  it  just  as  it  is  drawn  if  he  accepts  it  at  all.  To 
meet  the  difficulty  wliich  was  the  outcome  of  tliis  decision  ParUament 
passed  a  law  providing  that  acceptances  made  in  this  quahfied  manner, 
and  making  drafts  payable  at  a  bank  when  they  had  not  been  so 
drawn,  should  not  be  deemed  qualified  acceptances  but  proper  and 
legal  ones. 

In  this  country  there  have  not  been  any  special  enactments  covering 
the  point  in  question,  but  our  courts  have  always  held  precisely  the 
same  Anew  that  is  expressed  by  the  English  law,  that  an  acceptance  of 
a  draft  not  originally  made  payable  at  a  bank  whereby  it  is  made 
payable  at  some  particular  bank  in  the  place  on  which  it  is  drawn  is 


86  PRACTICAL    BAXKIXG, 

not  what  the  law  considers  a  qualified  acceptance  but  is,  on  the 
contrary,  a  legal  and  satisfactory  honoring  of  the  draft.  In  the  case 
we  have  cited  the  drawees  were  right  in  clauning  the  privilege  of 
accepting  their  draft  payable  at  the  bank  and  the  collecting  bank 
safely  approved  the  act. 

In  another  case  the  bank  received  from  a  corresponding  bank  a 
draft  for  acceptance  and  collection  which  bore  endorsements  and 
was  drawn  for  $5,000  upon  a  party  described  upon  the  paper  as  being 
in  business  in  the  place  where  the  bank  receiving  the  paper  for  collec- 
tion was  situated.  But  this  bank  happened  to  knoAv  positively  that 
the  drawee  had  transferred  his  place  of  business  to  another  city,  and 
knew  the  number  and  street  where  the  drawee  was  now  to  be  found. 
The  Collection-Clerk  asked  the  Cashier  what  should  be  done  with  the 
draft,  whether  it  should  be  protested  for  non-acceptance,  smce  the 
drawee  was  not  in  the  city,  or  sent  to  the  actual  place  of  busmess  of 
the  drawee,  where,  -without  doubt,  its  acceptance  could  be  obtained. 
There  Avas  some  little  discussion  between  the  officers  over  the  point, 
and  the  Collection-Clerk  claimed  that  in  ' '  Daniel  on  Bills  and  Notes  " 
the  position  was  taken  that  a  draft  could  not  be  be  protested  for  non- 
acceptance  until  it  had  been  presented  at  the  actual  place  of  business 
of  the  drawee ;  that,  at  any  rate,  any  other  protest  would  not  hold  the 
drawer  or  endorser.  But,  Daniel  or  no  Daniel,  the  bank  finally  came 
to  the  conclusion  that  the  only  safe  and  proper  course  was  to  present 
the  draft  as  drawn,  and  protest  it  in  the  city  of  the  bank  receiA-ing  it  if 
not  accepted.  Cases  like  this  often  come  up,  and  the  course  taken  in 
the  example  cited  is  the  correct  one.  Drawers  of  drafts  should  di-aw 
them  on  the  right  parties  in  the  right  places,  and  banks  which  handle 
them  for  collection  should,  in  the  absence  of  other  instructions,  follow 
the  address  upon  the  face  of  the  paper  as  far  as  the  town  of  the  drawees 
is  concerned. 

In  the  following  instance  the  address  became  of  the  nature  of  special 
instructions. 

The  draft  was  sent  me  for  collection  by  a  bank  in  New  York — sent 
to  me  in  Boston  in  the  regular  course  of  business.  It  was  drawn  at 
sight  by  some  one  in  Washington,  bore  several  endorsements,  and  the 
drawee  was  addressed  New  York — that  is,  the  di-aft  was  apparently  at 
first  regularly  drawn  on  a  drawee  in  that  city  or  who  was  supposed  to 
be  there.  But  when  the  draft  reached  me  there  had  been  written  in 
pencil,  underneath  the  name  of  the  drawee,  without  any  obliteration 
of  his  New  York  address,  "Hotel  Brunswick,  Boston."  My  Messenger 
presented  the  draft  for  acceptance  or  payment,  and  was  told  that 
there  was  no  person  there  of  the  name  sought  for — nothing  known 
there  of  the  drawee.  What  sliould  be  done  with  the  draft  under  these 
circumstances  ?  I  had  it  protested.  The  fact  that  it  was  drawn  on  a 
party  first  set  down  as  in  New  York,  and  not  otherwise  addressed, 
except  in  a  pencil  memorandum  underneath,  saying,  "Hotel  Bruns- 


THE    COLLECTION   DEPARTMENT    AXD    MESSENGER.  87 

■wick,  Boston,"  did  not  justify  or  render  it  safe  for  nie  to  omit  to  protest 
in  Boston.  The  New  York  bank  whicli  sent  the  draft  to  nie  in  this 
shape — that  is,  witli  a  Boston  address  noted  vipon  it — could  not  expect 
me  to  do  otherwise  than  protest  it  if  not  paid,  tliough  it  liad  omitted 
to  give  me  special  instructions  and  had  not  ci'ossed  out  the  first  address 
when  it  permitted  it  to  go  forward  through  me  to  its  second  address  in 
Boston. 

I  recollect  also  an  instance  when  the  Messenger  was  given  a  draft 
upon  a  house,  drawn  upon  three  months,  for  !?5,000,  and  was  instructed 
to  procure  its  acceptance.  This  he  did,  and  brought  the  accepted 
paper  back.  Shortly  after  his  return  with  it  the  acceptor  came  in  great 
haste  to  the  bank,  saying  that  through  an  error  of  liis  Book-keeper  he 
had  accepted  the  draft  by  mistake  when  he  was  owing  the  drawer  only 
a  trifling  amount,  and  asked  that  he  might  be  permitted  to  erase 
his  acceptance  and  cancel  it  by  drawing  his  pen  across  it.  This 
the  Collection-Clerk  of  the  bank  was  not  inclined  to  permit.  He 
never  happened  to  have  a  case  of  this  character  before,  but  he  was 
instinctively  reluctant  to  allow  the  proposed  mutilation  of  the  di'aft. 
The  matter  was  finally  referred  to  the  higher  oflicers  of  the  bank,  who 
very  correctly  refused  to  have  the  acceptance  erased. 

Such  a  case  as  tliis  is  not  very  unusual.  The  only  course  for  the 
bank  is  to  hold  on  to  the  name  they  have  in  good  faith  secured.  The 
bank  is  acting  simply  as  an  agent,  and  cannot  positively  know  all  the 
circumstances  which  may  environ  both  ends  and  the  indorsements  of 
the  draft,  and  it  is  not,  for  these  reasons,  safe  for  it  to  assume  the 
responsibility  of  allowing  the  withdrawal  from  it  of  a  name  which  it 
has  secured. 

The  coTirse  open  to  the  drawee  under  the  circuuistances  we  have 
described  is  to  notify  at  once  the  various  parties  to  the  draft  that  he 
has  made  a  mistake  in  accepting  it  and  shall  not  pay  it — that  he  has 
stopped  its  payment. 

If  a  contest  over  the  matter  arises  the  Courts  may  have  to  step 
in  and  settle  it. 

Then  again,  take  the  matter  of  action  under  powers  of  attorney. 
A  bank  holds  for  acceptance  a  draft  upon  a  party.  It  presents  it. 
Is  met  by  an  attorney,  who  says  his  power  is  on  file  at  a  certain 
bank.  Messenger  calls  at  the  bank  named  and  finds  it  there.  He 
takes  the  attorney's  acceptance  in  place  of  that  of  the  principal. 
Drafts  on  the  same  party  continue  to  come  along ;  and  the  Messenger 
continues  to  take  attorney's  acceptance  on  the  strength  of  the  fact 
that  he  has  once  seen  the  power.  But  this  power  may  have  been  im- 
mediately withdrawn  from  the  bank  where  it  had  been  left — revoked. 
How  is  a  bank  to  avoid  the  dangers  of  such  a  contingency  as  this  ? 
The  Messenger  cannot  go  every  day  to  see  if  that  power  is  still  where 
he  first  saw  it.     In  practical  banking  he  does  not  do  so. 

It  can  only  be  said,  in  view  of  such  cases  as  this,  that  banks  must 


88  PRACTICAL    BANKING. 

exercise  proper  care,  due  diligence  and  good  judgment,  and  assume  the 
common  risks  of  doing  business  of  any  sort. 

Perhaps  the  Messenger  will  occasionally  run  across  a  party  who 
objects  to  receiving  Ms  endorsement  on  the  draft  as  a  receipt  for  its 
payment,  but  as  he  is  the  officer  of  the  bank  who,  as  its  representative, 
actually  takes  the  payment,  his  rece.ipt — his  endorsement  upon  the 
back  of  the  paid  and  surrendered  draft — is  certainly  as  good  as  that  of 
the  Cashier  and  will  bind  the  bank  and  secure  the  payer  equally  as 
well  as  that  of  the  latter. 

Some  drawees,  however,  are  very  set  in  demanding  a  Cashier's 
endorsement.  To  give  them  this  endorsement  requires  that  the 
Cashier  shall  endorse  payment  received  upon  the  paper  in  advance  of 
its  presentation  by  the  Messenger,  and  when  he  is  really  entirely  igno- 
rant whether  it  will  be  honored  or  not.  This  is  a  practice  neither  safe 
nor  convenient.  It  is  not  safe,  for  the  paper  bearing  his  receipt  may 
be  lost  while  in  transit ;  it  is  not  convenient,  because  the  paper  will 
have  to  be  mutilated  by  an  erasure  of  his  endorsement  if  it  is  not 
finally  paid. 

While  I  am  speaking  of  this  out-of-door  work  let  me  mention  a  risk 
or  danger  of  another  character.  I  refer  to  the  danger  of  actual 
assault  or  theft  to  which  the  Messengers  are  unavoidably  exposed. 

In  the  presentation  of  drafts  and  delivery  of  notices  they  are, 
particularly  in  our  large  cities,  often  called  upon  to  visit  disagreeable 
localities  and  to  enter  shops,  houses  and  stores  of  an  unsavory  character. 
But  these  featui*es  of  their  business  give  them  but  very  httle  thought 
or  anxiety.  They  go  their  rounds  resolutely  and  faithfully,  giving  little 
heed  to  the  men  or  the  surroundings  they  fall  in  with,  their  only  aim 
being  to  get  at  the  right  numbers  and  persons  as  expeditiously  as 
possible. 

On  other  errands  the  bank's  ' '  Out-Tellers, "  as  they  are  termed  in 
London,  are  daily  obliged  to  carry  about  the  streets  a  deal  of  money, 
valuable  papers,  stocks,  bonds,  etc. 

Where  unusually  large  amounts  of  cash,  or  securities,  are  to  be 
moved  through  the  streets,  as  in  paying  and  receiving  heavy  balances 
at  Clearing-House,  it  is  an  excellent  rule  never  to  permit  the  Messenger 
carrying  these  large  sums  to  go  alone.  Many  city  banks  and  bankers 
make  it,  for  instance,  a  rule  that  none  of  their  Messengers  shall  carrj' 
about  the  streets  the  sum  of  ten  thousand  dollars  and  over  without 
having  another  man  go  with  them. 

There  are  a  variety  of  opinions  regarding  the  best  way  of  carrying 
money  and  valuable  papers  about  the  streets.  I  am  of  the  decided 
opinion  that  all  bank  messengers  should  put  their  valuables  in  wallets 
— that  they  should  never  be  allowed  to  carry  them  in  their  hands,  and 
,fully  exposed  to  view,  as  many  of  them  seem  determined  to  do.  And 
I  think  it  a  good  plan  for  the  bank  messengers  m  large  places,  who 
have  a  good  deal  of  steady  work  in  the  way  of  carrying  about  the 


THE    COLLECTIOX    DEPARTMENT    AXD    MESSENGER.  89 

streets  large  sums,  to  have  their  wallets  chained  to  theiu,  as  is  the 
general  rule  in  such  work  with  the  bank  messengers  of  London. 

Some  Messengers  who  go  on,  year  after  year,  carrymg  money  about 
our  streets,  in  all  sorts  of  ways,  without  losing  anything,  grow  careless, 
and  also  grow  set  in  their  way  of  so  carrying  their  money,  no  matter 
how  objectionable  that  way  may  seem  to  be  to  their  superior  inside 
officers.  These  Messengers  need  to  be  reminded  from  time  to  time  of 
the  many  street  assaults  and  robberies  which  have  been  made  on  men 
in  their  business,  and  of  the  methods  which  have  been  practised  in 
making  these  snatches,  as  well  as  that  it  is  a  well-established  fact  that 
the  thieves  of  our  cities  know  well  every  bank  messenger,  and  have 
made  their  street  money-habits  a  study. 

After  all  I  have  said  regarding  the  advantage  of  intelligence  on  the 
part  of  the  Messenger  as  well  as  the  other  clerks  it  may  sound  singular 
that  I  should  finally  say  of  him  that  he  should  at  times,  when  under 
instructions  from  responsible  officers  be  but  an  intelligent  machine — 
acting  strictly  in  the  line  of  his  orders  with  care  neither  to  add  to  nor 
take  from  them — for  in  many  cases  he  is  called  upon  to  bear  messages 
and  do  general  errands  the  bearings  of  which  his  superiors  have  no 
time  to  explain  and  of  wliich  he  can  perhaps  know  but  little. 

I  add  an  illustrative  anecdote  the  hero  of  which,  I  will  however 
admit,  was  quite  a  raw  hand. 

A  note,  bearing  endorsements,  was  due,  and  at  the  close  of  bank 
hours  it  had  not  been  paid.  As  it  was  signed  by  a  well-known  house 
which  was  in  the  habit  of  promptly  meeting  all  its  engagements  the 
President  presumed  that  there  had  been  some  forgetfulness  or  mistake 
somewhere  and  told  the  Messenger  to  take  the  note  to  the  promisors 
and  endeavor  to  collect  it  from  them,  giving  them  a  chance  to  pay  it 
before  it  should  take  its  otherwise  inevitable  path  to  the  hands  of  the 
notary.  This  action  under  such  circumstances  is  what  every  bank 
should  follow.  It  is  always  good  poUcy  to  save  good  notes  from  pro- 
test, the  failure  to  meet  them  often  bemg  simply  the  result  of  some- 
body's error. 

In  the  case  in  question  the  Messenger  presented  the  note,  demand- 
ing its  payment.  When  the  promisors  told  him  they  had  made  a 
mistake  and  forgot  the  paper  but  would  pay  it  the  next  day  the 
Messenger  said  ' '  all  right, "  and  took  the  note  back  to  the  bank,  to 
which  he  made  no  report  of  the  way  he  had  committed  himself.  The 
note  not  being  paid  was  protested.  The  next  day  its  signers  came  to 
pay  it  and  were  very  indignant  over  its  protest,  because  the  represen- 
tative of  the  bank  had  told  them  that  it  was  "all  right"  when  they 
said  they  Avould  pay  it  to-morrow. 

The  matter  in  question  caused  so  much  trouble  and  annoyance  that 
that  bank  Messenger  never  afterwards  ventured  to  say  "all  right" 
except  when  specially  instructed  to  do  so. 

I  think  we  have  now  pretty  well  covered  the  Messenger's  part  in 


90 


PRACTICAL    BAXKIXG. 


this  collection  work  and  we  will  look  at  some  other  points  in  relation 
to  the  fonns  of  business  paper  and  other  questions  which  luay  ai-ise. 
"IN   EXCHANGE"    AND    "WITH   EXCHANGE." 

These  expressions  or  stipulations,  when  incorporated  into  the  body 
of  a  note,  or  an  acceptance,  are  certainly  equivalent  to  a  promise  to 
pay  an  uncertain  amount,  on  conditions,  and,  in  the  ophiion  of  many, 
have  a  tendency  to  lay  the  instruments  in  question  open  to  the  charge 
of  being  of  a  non-negotiable  character,  for  it  is  a  very  old  rule  that  a 
negotiable  instrument  must  promise  to  pay  a  definite  sum  and  that  only. 

There  are  few  experienced  bankers  who  would  not  gladly  johi  in  a 
recommendation  that  all  use  of  such  expressions  as  we  have  named  be 
forever  abandoned.  But  the  often  used  term  of  payable  ' '  in  exchange  " 
is  decidedly  more  objectionable  than  the  * '  with  exchange ''  formula. 

In  order  to  make  the  points  we  have  in  hand  very  cleai-,  I  here  give 
the  two  forms  as  seen  in  regular  use  (see  Forms  18  and  19)  : 


.<?  ScToo..  ^  .^-^^g>^;^^'-^^<^^^oLi^  man 


after  dale'^sd/ promise  ^crpcvf 


■ddzd^T)ollars 


Tqyahle  (7/.Gyz2?-^;^^:^^g/'<^^^ 


^U^f'^^c 


\ 


y 


_ X  ^^^^        ^  JL ^ f 

^  Form  IS.  U 

^     ...  —  '^^^^^^^^(^^J^JLafter  date^Lpromip^  to  pciy 

1^'  to  Ihr.fuyhu-Mr  J/^M^/^^^  ^^/r£^yj  Z'&^J 

^    (W^/rzMyyC//^/-t-uy^.^<^~^)2^6rff^  liars 


to  tlmnjyhv-Mr   J>&-/^y^  ^^  /"(OrJ 

(Wyy/-zMyyC//^/-t-uy^.y^<^~^)2^6^  liars 

'Payable  nt  <J^r/.  ^/y^;<^^^  /^^/'.4^/::f^oj. 
■Value  rcyceixed         2/^         ^-^^Z      _^X  ^r/^ 

,^fZ-./: — 'J' V  ^ 


wx^m;^^ 


Form  19. 

The  first  note  (Form  18) — the  "with  exchange  on  New  York"  paper 
— carries  with  the  promise,  in  banldng  usage,  the  agreement  that  the 
Chicago  promisor  shall  pay,  in  addition  to  the  face  amount  of  the 
paper,  the  cost  of  putting  the  same  in  New  York — the  expense  that 
would  be  necessary  in  order  to  buy  a  draft  on  a  New  York  city  bank 
for  tlie  same  sum. 

But  the  ambiguous  and  obnoxious  expression  in  tlie  other  note 
(Porra  19),  payable  "in  Now  York  Exchange,"  though  often  used  Avith 


THE    COLLECTIOX    DEPARTMENT    AND    MESSENGER.  91 

the  intent  of  being  understood  as  entirely  synonymous  with  tlie  "  with 
exchange"  clause,  is  open  to  a  very  serious  objection,  and  the  bank 
which  attempts  to  collect  paper  drawn  in  this  manner  is  liable  to  find 
itself  in  an  unpleasant  predicament. 

It  is  claimed  that  the  Chicago  payor  of  paper  of  this  type,  whether 
a  note  or  a  draft,  has  the  right  to  tender  in  its  payment  such  a  draft 
on  New  York  as  he  may  please,  such  a  "payment"  coming  within  the 
scope  of  the  agreement  to  pay  "in  New  York  Exchange." 

If  the  collecting  bank  attempts  to  discriminate  regarding  the 
character  of  the  exchange  on  New  York  that  is  offered  and  raises  the 
question  whether  or  not  the  tendered  exchange  is  of  good  repute  it 
may  find  itself  in  an  unwelcome  controversy  \nth  the  payor,  and  it 
may,  in  the  end,  be  difficult  to  say  Avho  has  the  right  to  decide  upon 
the  repute  of  the  exchange  tendered. 

Banks  should  set  their  faces  strongly  against  the  use  of  such  a  form. 
They  have  often  taken  the  very  sensible  ground  that  they  would  not 
undertake  to  collect  paper  of  this  description,  unless  the  owners  of  the 
paper  would  assume  the  entire  responsibility  incident  to  its  irregularity. 

INTEREST    UPON    GRACE. 

His  note  was  written  payable  six  months  after  date,  with  interest  at 
six  per  cent. ,  and  made  payable  in  a  State  where  gi-ace  prevailed.  He 
called  at  the  bank  which  was  holding  the  note  for  collection  on  the 
last  day  of  the  six  months  and  tendered  to  the  Teller  the  face  of  the 
paper  with  interest  to  this  day — interest  to  its  maturity  without 
counting  in  the  three  days  of  grace.  The  bank,  which  was  holding 
the  note  for  collection  for  account  of  one  of  its  depositors,  refused 
to  settle  the  payment  in  this  manner,  and  demanded  interest  upon  the 
note  to  its  last  day  of  grace.  The  signer  of  the  paper  demurred  most 
decidedly  to  paying  this  three  days'  gi-ace  interest,  but  the  bank  very 
correctly  insisted  that  the  matter  must  be  settled  in  this  way,  and  in 
that  manner  it  was  finally  adjusted. 

The  claim  for  the  interest  for  the  three  days  was  just  as  equitable 
and  legal  as  the  claim  for  that  of  the  six  months.  Where  grace  is  the 
law  the  due  time  of  paper  issued  there  is  as  firmly  fixed  at  the  expira- 
tion of  grace  as  it  possibly  can  be. 

There  is  an  interesting  point  about  note  paying  that  may  be  noted 
in  this  connection,  and  that  is  that  a  holder  of  a  time  note  is  not 
obliged,  and  cannot  be  compelled,  to  accept  its  payment  before 
maturity.  In  the  case  of  the  note  on  six  months,  with  interest,  wliieh 
we  have  just  referred  to,  a  tender  of  the  principal  and  interest  to  the 
last  day  of  grace  could  not  compass  the  settlement  of  it,  and  could  not 
secure  to  the  signer  possession  of  the  paper  unless  the  holder  so  elected. 

DRAFTS   WITH   BILLS    OP   LADING   ATTACHED. 
In  collecting  docuu^entary  paper  great   care  has  to  be  taken  in 
several  points.     A  bank  recei\ing  for  collection  paper  with  a  bill  of 


^2  PRACTICAL    BANKING. 

lading  attached,  where  instructions  come  with  such  paper  to  dehver 
the  bill  of  lading  only  on  payment  of  the  draft,  must  be  exceedingly 
careful  in  taking  checks  for  such  payments.  In  the  next  place  the 
bank  should  bear  in  mind  that  in  handling  a  bill  of  lading  it  becomes 
for  a  time  the  custodian,  as  it  were,  of  merchandise,  and  that  this 
merchandise  may  be  of  a  perishable  character.  In  several  cases  banks 
have  lost  heavily  by  negUgence  in  presenting  for  acceptance  or  payment 
drafts  of  the  character  in  question. 

Then  if  the  paper  is  drawn  upon  time  there  is  the  question  of  the 
delivery  of  the  bill  of  lading  upon  the  acceptance  of  the  draft. 

Since  the  peculiar  decision  of  the  Supreme  Court  of  the  United  States 
apparently  requiring  holders  of  bills  of  lading  accompanying  time  drafts 
to  deliver  them  to  the  drawees  on  acceptance  of  the  drafts  unless 
otherwise  instructed,  the  National  banks  of  the  country  have  not 
seemed  to  adopt  any  uniformity  of  action  for  such  cases.  At  the  time 
of  the  rendering  of  this  decision  the  banks  of  New  York  issued  circulars 
to  their  correspondents  directing  them  to  give  special  instruction  in 
any  case  where  they  desired  bills  of  lading  held  after  acceptance  of  the 
drafts  accompanying  them.  Wliere  the  New  York  bank  receives  no 
special  instructions  to  the  contrary  it  invariably  surrenders  the  bill  of 
lading  upon  acceptance  of  the  draft.  In  Boston  many  of  the  leading 
banks  have  taken  the  very  safe  ground  that  they  must  have  from  their 
correspondents  in  all  cases  absolute  and  specific  instructions  as  to 
whether  the  bills  of  lading  shall  or  shall  not  be  surrendered.  In  cases 
where  instructions  are  not  at  first  sent  Avith  the  drafts  the  mail  or  wire 
is  at  once  used  to  obtain  them,  and,  as  twenty-four  hours  are  allowed 
for  acceptance  of  drafts,  these  required  instructions  ought  in  that  time 
to  be  procurable  from  anywhere  in  the  United  States.  This  is  by  far 
the  most  prudent  course  of  action  and  one  which  should  be  recom- 
mended for  general  adoption.  Our  reasons  for  holding  to  this  opinion 
are  found  in  the  character  of  the  famous  Bill  of  Ladmg  decision  itself. 
A  careful  study  of  it  will  convince  any  one  tliat  the  only  safe  course  is 
that  recommended,  wliich  has  been  endorsed  by  most  eminent  counsel. 

PAYING  BACK  MONEY. 
The  note  was  payable  at  the  counter  of  an  adjacent  bank.  The 
bank  holding  it  had  discounted  it  for  a  dealer,  whose  endorsement  it 
bore.  At  maturity  the  paper  was  presented  and  it  was  cashed.  The 
same  morning  the  bank  which  had  paid  the  note  discovered  that  it  had 
done  so  in  error;  that  the  promisor  had  not  the  funds  to  meet  the  paper, 
and  that  their  Teller  had  connuitted  a  gross  blunder  in  cashing  the 
paper.  They  asked  that  the  money  be  refunded.  The  repayment  of 
the  money  was  made  with  some  hesitation,  for  it  was  now  apparent 
that  the  promisor  of  the  paper  had  failed.  The  money  was  returned, 
however,  and  the  note  taken  back  and  protested.  The  endorser  of  the 
paper,  who  was  a  very  sharp  but  perfectly  solvent  man,  heard  that  his 
bank  had  once  collected  the  note,  and  on  that  ground  refused  to  pay 


THE    COLLECTION    DEPARTMENT   AND    MESSENGER.  93 

it.  In  the  end  the  Courts  held  that  the  endorser  must  pay  because  he 
had  not  been  released  or  compromised  by  the  collection  and  repayment 
in  question. 

This  interesting  case  is  of  a  very  suggestive  character.  Bank  Man- 
agers and  Tellers  are  always  reluctant  to  pay  back  money  which  they 
have  once  collected  upon  endorsed  paper  which  -vvill  in  case  of  non- 
payment be  thrown  back  upon  tliird  parties  with  whom  they  can  have 
no  immediate  consultation.  This  is  perfectly  natural  and  justifiable. 
In  all  cases  where  the  circumstances  are  similar  to  those  described, 
where  money  is  paid  through  a  mistake  by  innocent  parties  acting  for 
others,  it  is  perfectly  legal  and  good  bankmg  to  pay  it  back.  This 
point  comes  up  very  often,  and  very  many  bank  officers,  acting  under 
a  fear  of  incurring  responsibilities  similar  to  those  which  the  endorser 
in  this  particular  case  endeavored  to  throw  upon  his  bank,  refuse  point 
blank  to  refund  payments  which  have  once  been  made  unless  they  are 
able  to  secure  consent  to  this  repayment  from  endorsers. 

In  another  case  where  there  was  no  third  party  and  the  payment 
was  intentional  the  problem  put  on  a  different  aspect. 

It  was  an  endorsed  note  for  §10,000  and  the  day  of  its  maturity  had 
arrived.  The  promisor  came  to  the  bank  which  held  it  for  collection 
for  a  correspondent  and  stated  to  the  Cashier  that  the  note  was  not  to 
be  paid,  since  arrangements  had  been  made  for  its  renewal,  and  asked 
if  it  had  not  been  ordered  home.  The  Cashier  had  received  no  such 
instructions,  and  said  the  note  would  have  to  be  paid  or  protested. 
The  promisor  raised  the  money  and  met  the  note.  The  next  day  the 
Cashier  of  the  collecting  bank  received  an  order  by  mail  to  return  the 
note  to  the  correspondent  who  had  forwarded  it  for  collection.  He 
did  not  have  possession  of  the  note,  but  the  money  for  it  instead.  To 
return  the  money  to  the  promisor  and  get  back  the  note  would  be 
assuming  an  unwaiTantable  responsibility  in  the  absence  of  definite 
instructions  from  the  correspondent  to  that  effect,  and  the  only  safe 
course  was  that  which  the  Cashier  pursued.  He  ^vrote  to  the  oA^Tier  of 
the  paper,  told  him  it  had  been  paid  and  passed  to  his  credit,  and  asked 
him  whether  he  should  reverse  the  credit,  pay  back  to  the  maker  the 
money  and  take  the  note,  or  if  he  should  let  the  matter  stand  as  it 
was.  Instructions  came  to  follow  the  latter  course  and  that  ended  the 
matter. 

HO"W  EARLY  IN  THE  DAY  IS  A  NOTE  DUE? 
A  bank  discounted  a  note  which  was  the  promise  of  a  depositor 
with  the  bank.  It  had  considerable  anxiety  about  the  reliability  of 
the  note,  particularly  as  far  as  the  signer  was  concerned.  On  the 
morning  of  its  maturity  the  signer,  who  had  made  the  note  payable  at 
the  bank,  had  a  balance  barely  sufficient  to  meet  the  paper.  The  bank 
very  naturally  made  haste  to  charge  the  note  against  the  balance.  It 
did  this  as  soon  as  it  opened  for  business.  During  the  rest  of  that  day 
checks  upon  this  early  appropriated  balance  came  floAving  in,  tlirough 


94  PRACTICAL    BAXKIXG. 

the  Cleai'ing-House  and  over  the  counter,  and  were,  of  course,  refused 
payment.  There  was  a  legal  contest  over  the  question  whether  the 
"bank  had  a  right  to  seize  the  balance  upon  which  checks  were  out- 
standing at  so  early  an  hour  in  the  day  and  dishonor  all  the  other 
demands  upon  it,  the  result  being  a  final  decision  of  the  Court  that 
the  bank  did  right  and  that  a  note  due  on  any  given  day  might  under 
the  circumstances  described  and  for  the  purpose  of  payment  be 
considered  as  due  as  soon  as  the  bank  opened  and  not  at  the  close 

of  banking  hours. 

UNPAID    PAPER. 

When  maturing  notes  and  acceptances  held  by  a  bank  under 
discount  or  collection  for  the  account  of  its  dealers  remain  unpaid 
at  the  close  of  banking  hours  on  the  day  of  their  maturity,  there  are 
one  of  two  courses  for  the  bank  Manager  to  take  with  regard  to  them. 
He  may  hand  the  paper  at  once  to  the  Notary  for  protest  (we  are 
considering  paper  which  bears  indorsements)  or,  instead,  dispatch  his 
Messenger  to  notify  either  the  promisor,  acceptor  or  indorser — that  is, 
to  notify  the  first  one  likely  to  respond — that  the  paper  remains  unpaid. 
The  latter  course  is  the  most  judicious  one  in  many  cases.  The  parties 
to  the  paper  who  were  to  pay  it  may  have  forgotten  it,  made  a 
mistake  in  entering  its  time  of  maturity  on  their  books,  or  mislaid  the 
notices.  It  may  happen  that  the  non-payment  is  owing  to  some  error 
made  by  the  bank  in  leaving  with  the  promisor  a  Avi-ongly-fiUed-out 
notice  which  has  misled  him.  Wliatever  may  be  the  reason  for  the 
non-payment  in  question,  it  is  better  for  a  bank,  where  it  is  dealing 
wdth  parties  who  are  believed  to  be  responsible  and  are  supposed  to  be 
ready  to  meet  all  demands  upon  them,  to  give  them  an  opportunity  to 
do  so  and  to  correct  their  errors  before  handing  the  demands  upon 
them  over  to  a  Notary.  Such  a  course  of  action  cultivates  a  kindly 
feeling  between  the  bank  and  the  dealer,  and  in  the  long  run  helps  the 
business  of  a  bank  by  bringing  it  favor  and  custom. 

NOTES    PAYABLE    AT   A   BANK. 

The  treatment  of  such  notes  varies  in  different  localities. 

In  Clearing-House  cities  it'is  a  quite  general  custom  to  charge  them 
in  to  the  banks  where  they  are  to  be  paid  on  the  day  of  maturity  and 
in  other  places  they  would  be  presented  at  the  bank  by  the  Messenger. 
But  the  exception  to  such  action  is  where  the  collecting  banks  happen 
to  know  that  the  maturing  payable-at-bank  notes  wiiich  they  hold  will 
not  be  paid  at  the  bank  Avhere  they  are  made  payable — that  the 
promisors  have  not  provided  for  their  discharge  in  this  manner,  but 
intend  to  call  at  the  l?ank  which  holds  them  for  collection  and  pay 
them  over  its  counter. 

When  the  note  has  been  charged  through  the  clearing  there  may 
yet  be  a  question  of  its  payment.  In  a  recent  case  the  bank  held  a 
note  which  was  payable  at  a  neiglibor  bank.  As  these  two  banks  were 
located  in  a  Clearing-House  city  the  note  in  question  was,  at  its  maturity* 


THE    COLLECTION    DEPARTMENT    AND    MESSENGER.  95 

charged  into  the  bank  where  it  had  been  made  payable  by  the  bank 
holdmg  it  for  collection.  The  rule  prevailed  in  the  Clearing-House 
arrangements  of  the  jilace  to  which  we  are  referring  that  all  checks 
charged  in,  which  were  not  returned  to  the  banks  before  1  o'clock  of 
the  same  day,  should  be  considered  paid.  Up  to  the  date  of  the  bank- 
ing incident  of  which  we  are  writing  the  impression  generally  obtained 
that  charged-in  notes  stood  ujion  the  same  footing  as  checks — that  a 
charged-in  note,  not  returned  before  1  o'clock  of  the  same  day,  might 
be  considered  as  paid  by  the  bank  to  which  it  had  been  debited  through 
clearing.  Out  of  the  lawsuit  wliieh  arose  over  tliis  particular  case 
there  was  brought  out  a  Supreme  Court  decision  to  the  effect  that 
notes  were  not  to  be  considered  the  same  as  cheeks.  The  note  in 
question,  which  was  a  vei-y  poor  one,  had  been  returned  with  the 
answer  of  "no  funds"  just  before  2  o'clock — the  hour  of  bank-closing 
in  the  place.  It  Avas  ruled  that  this  return  was  not  too  late  to  secui-e  a 
refund  of  the  money  on  it. 

This  case  was  ruled  on  by  the  Supreme  Court  of  Massachusetts. 

Bankers  in  that  State,  at  least,  now  never  consider  a  note  which 
they  have  sent  in  tlii-ough  clearing  as  jaaid  beyond  question  until  they 
have  sent  to  the  bank  to  which  it  has  been  charged  and  received  assur- 
ance of  its  payment,  or,  at  least,  until  the  close  of  bank  hours  has 
been  reached  without  a  return  of  the  note. 

It  does  not  follow  positively,  from  the  fact  that  a  man  has  written 
his  note  payable  at  a  particular  bank,  that  he  intends  to  pay  it  there. 
He  has  simply  given  an  easily  reached  address  where  the  note,  if  not 
otherwise  taken  care  of,  may  be  presented  and  a  legal  demand  made 
for  its  payment,  and  he  has  also  insured  himself  against  accidental 
ignorance  or  neglect  on  his  own  part  by  making  it  positive  that  the 
note  will  be  presented  there  before  it  can  be  considered  dishonored. 
From  the  bank's  standpoint  it  has  long  been  a  question  whether  notes 
and  acceptances  drawn  payable  at  a  bank  should  be  considered 
in  the  same  light  as  cheeks  upon  the  bank — as  orders  to  pay  without 
further  advice  or  instructions — and  with  us,  banks  which  keep  the 
accounts  of  depositors  who  have  made  their  notes  payable  there,  are 
not  in  the  habit  of  paying  such  notes  out  of  deposit  balances  unless 
the  depositors  have  left  with  them  special  instructions  so  to  do.  The 
EAglish  view  is  that  they  should  be  considered  and  treated  as  checks. 
The  London  promisor  or  acceptor  who  makes  liis  paper  payable  at  a 
London  bank  knows  that  that  paper  will,  at  its  matiu'ity,  be  charged 
in  through  clearing  to  the  bank  where  it  has  been  made  payable,  and 
that  it  will  be  paid  at  the  bank,  if  he  has  balance  enough,  precisely  as 
if  it  was  his  own  direct  check  upon  the  bank.  In  New  York  city  the 
London  idea  prevails  in  general.  There  have  been  important  decisions 
in  the  courts  of  this  country  contrary  to  this  action.  It  has  been  held 
that  the  bank  wliich,  without  special  direction,  pays  paper  made  paya- 
ble at  its  place  of  business,  performs  a  gratuitous  service  and  assumes 


96  PKACTICAL    BANKIXG. 

an  unwarrantable  risk.  There  are  many  good  reasons  for  these  vieAvs. 
The  maker  of  a  note  may  not  wish  to  pay  liis  note  at  all,  concluding  to 
stop  its  payment  for  some  reason  or  other.  A  bank  which  acts  in  the 
matter  without  special  orders,  not  having  in  hand  a  full  description  of 
the  maturing  paper  which  a  promisor  may  wish  to  have  it  pay,  asstimes 
considerable  risk  in  the  possible  payment  of  fraudulent  jjaper.  The 
banks  of  Boston  have  long  taken  this  ground :  parties  who  make  their 
paper  payable  at  a  bank  in  Boston  must,  before  its  maturity,  furnish 
that  bank  with  a  list,  giving  dates,  amounts,  and  full  instructions  for 
payment,  if  they  wish  to  ensure  its  payment  out  of  their  regular  bal- 
ances. 

This  last  method  of  management  is  the  one  likely,  in  the  end,  to  be 
the  general  custom  in  the  United  States. 

There  is,  however,  a  point  relative  to  tliis  matter  which  should  be 
noted.  A  bank  which  has  discounted  a  note  for  a  depositor  has  the 
undoubted  right  to  charge  it  to  that  depositor's  balance  if,  at  maturity, 
it  remains  unpaid.  If  it  did  not  so  act,  it  would  certainly  be  in  danger 
of  losing  any  endorsers  of  the  paper,  through  thus  neglecting  to  secure 
its  payment. 

CHECKS  IN  PAYMENT  OF  NOTES,  DRAFTS,  ETC. 
One  of  the  most  difficult  questions  a  bank  doing  a  heavy  business 
has  to  deal  with  is  that  of  how  to  carry  itself — where  to  draw  the  line — 
in  the  matter  of  takmg  checks  on  other  banks  in  payment  of  its  matu- 
rities. Many  of  our  city  banks  instruct  their  officers  to  take  no  uncerti- 
fied checks  whatever  in  the  premises  in  question.  Having  made  such 
a  rule  they  smooth  away  some  of  its  obnoxious  points  by  introducing 
as  many  exceptions  to  it  as  prudence  and  safety  may  dictate.  The  rule 
is  in  many  banks  a  necessity ;  the  exceptions  are  also  a  necessity.  Very 
few  subordinate  bank  officers  have  the  knowledge  and  the  judgment 
required  for  a  safe  settlement  of  the  question  of  what  checks  shall  be 
taken  and  what  refused;  and  no  experienced  Teller,  Messenger,  etc.,  is 
desirous,  or  even  witUng,  to  assume  the  responsibility  of  discriminating 
in  this  check  busuiess.  The  only  way,  therefore,  is  to  set  tip  for  the 
bank  clerks  the  rule  I  have  named,  and  then  have  the  Cashier  and 
President  at  hand  to  approve  necessary  —  desirable  —  exceptions,  the 
bank  itself  taking  the  entire  risk  involved  as  a  matter  of  wisdom  and 
policy.  Dealers  are  often  offended  by  the  rule  in  question ;  but  those 
most  experienced  and  of  the  most  solid  credit  are  the  last  to  be  dis- 
pleased by  it.  The  application  of  a  little  logic  to  the  premises  is  often 
of  service.  Why  should  a  bank  go  through  the  form  and  all  the  risk 
and  trouble  of  taking  on  a  hundred  thousand  dollars  in  bulky  bonds, 
as  collateral  for  a  demand  note,  and  then  give  up  everytliing  on  an 
individual  check  ?  It  is  often  said  that  no  decent  man  will  tender  a 
bank  a  cheek  that  is  not  a  good  one — that  such  a  tender  is  a  fi-aud, 
and  all  that.  But  I  have  known  many  most  excellent  men  who  have 
settled  demands  with  checks  which  have  proved  worthless — proved  so 


THE    COLLECTIOX    DEPARTMENT    AXD    MESSENGER.  97 

through  no  fault  of  their  o\\ti — for  the  deposits  upon  which  these 
cheeks  were  drawn  went  back  on  them,  being  made  up  of  checks  of 
people  who  had  failed. 

ACCEPTANCE    AND    RETURN. 

Banks  are  often  called  upon  to  send  forward  to  various  points  for 
acceptance  and  return  drafts  which  they  may  have  received  from 
depositors,  who  ^ish  them  handled  through  the  collection  department, 
and  to  be  returned  after  acceptance  has  been  procured,  since  t'-ey  are 
due  a  long  time  ahead,  and  the  depositor,  for  that  reason,  prefers  to 
hold  them  in  liis  own  hands  until  near  maturity. 

It  is  not  a  good  plan  to  send  paper  endorsed  in  blank  through  the 
mails,  since  it  becomes,  under  such  circumstances,  negotiable  in  any 
hands  into  which  it  may  fall,  even  without  the  assistance  of  a  forged 
endorsement. 

It  often  becomes  a  question  with  banks  how  this  acceptance  and 
return  paper  shall  be  endorsed  before  it  is  sent  forward.  A  good  plan 
is  to  place  over  the  last  endorsement  a  stamp,  making  the  paper  payable 
to  the  bank  which  is  handling  it. 

With  such  an  endorsement  it  is  in  good  form  for  a  journey  through 
the  mails  and  in  the  right  shape  to  go  into  the  collection  flies  of  the 
bank  sending  it  forward  when  it  comes  back  accepted. 

The  only  embarrassment  in  these  cases  arises  when  the  customers 
wish  to  take  the  paper  back — to  hold  it  themselves,  after  it  has  been 
accepted,  till  close  on  to  maturity,  at  which  time  they  may  msh  to 
put  it  into  some  other  bank.  In  some  instances  they  may  wish  to  sell 
the  paper  after  it  has  been  accepted  or  may  even  wish  to  get  it  dis- 
counted in  some  quarter  other  than  the  bank  through  which  it  has 
been  passed  for  acceptance  and  return. 

In  such  eases  there  seems  nothing  to  be  done  except  to  run  the  risk 
of  sending  the  paper  through  the  mail  endorsed  in  blank,  or  to  submit 
to  having  it  disfigured  a  little  by  putting  on  and  crossing  out  what  may 
be  termed  a  simple  transmission  endorsement  such  as  the  one  I  have 
above  mentioned. 

RESPONSIBILITY    FOR    COLLECTIONS. 

A  bank  receiving  paper  for  collection  payable  at  other  banks,  and 
which  in  due  course  sends  such  paper  to  those  banks  forcollection  and 
remittance,  is  responsible  for  the  conduct  of  its  collection  agents. 
There  have  been  suits  at  law  where  the  question  at  issue  and  the 
verdicts  and  decisions  fuUy  cover  this  point,  and  my  reader  probably 
has  at  hand  the  means  of  turning  to  the  record  of  these  interesting  and 
important  cases. 

It  is  claimed  that  failed  collecting  banks  have  no  right  to  cover  in 
as  a  portion  of  their  assets  proceeds  of  collections  made  for  their  corres- 
pondents, and  awaiting  remittance  at  the  time  of  their  failure.  It  is 
held  that  such  special  balances  should  be  deemed  fiduciary  or  trust 


98  PRACTICAL    BAXKIXG. 

funds  and  not  the  property  of  the  suspended  bank.  But  all  attempts 
to  maintain  this  position  have  been  upset  by  the  Supreme  Courts. 

Banks  have  in  many  instances  attempted  to  hedge  against  all 
disagreeable  collection  risks  and  responsibility  involved  in  the  situation 
■which  I  have  explained  by  settuag  up  at  the  outset  certain  disclaimers. 
I  have  before  me  a  bank  pass-book  upon  the  cover  of  which  is  pasted 
the  following  notice  : 

"  This  bank  receives  paper  for  collection  as  agents  only,  and  does  not  hold  itself 
liable  for  any  loss  or  damage  which  may  accrue  through  the  default  of  any  bank  or 
banks  to  which  said  paper  may  be  sent  for  collection." 

Years  ago,  under  old  State  bank  systems,  notices  of  a  similar 
description  have  been  printed  upon  bank  pass-books  and  posted  in 
conspicuous  places  in  bank  offices.  Such  disclaimers  can  certainly  be 
of  no  possible  harm  to  the  disclaimants,  but  it  should  always  be  borne 
in  mmd  that  they  are,  like  disclaimers  of  responsibility  on  railroad 
tickets  or  express  receipts,  resting  upon  very  uncertain  foundations. 
Courts  often  show  them  very  little  respect. 

The  railroad  tickets  in  use  in  England  are  solidly  packed  with  an 
immense  variety  of  disclaimers  of  every  name  and  nature  printed  in 
very  fine  type  and  supposed  to  cover  every  possible  contingency  which 
has  proved  to  be  of  a  disagreeable  and  costly  character  in  past  contests. 

Some  time  ago  the  London  Times  took  up  seriatim  the  disclaimers 
upon  one  of  the  tickets  of  a  leading  English  railroad  and  showed  how 
every  one  of  them  had  been  overthrown  in  English  Courts. 

In  a  recent  publication  I  have  seen  misleading  views  upon  tliis 
subject,  quite  contrary  to  those  I  have  advanced. 

The  article  in  question  held  that  the  bank  wliich  exercises  diligence 
is  not  responsible  for  the  conduct  of  its  collecting  agent — that,  for 
instance,  any  loss  occurring  from  the  failure  of  the  bank  to  which 
it  had  with  good  judgment  and  in  good  faith  forwarded  paper  for 
collection  would  fall  upon  the  owrer  of  the  paper  depositing  it  with 
the  bank  for  collection.  This  is  generally  known  in  banking  and 
collection  circles  as  the  Massachusetts  view,  and  was  at  one  time 
widely  held.  Parties  who  look  up  the  point  by  referring  to  legal 
decisions  not  of  a  recent  date  are  likely  to  similarly  conclude  that  the 
responsibility  rests  with  the  owner  of  the  collections.  But  comparatively 
recent  decisions  of  the  highest  Courts  have  changed  the  whole  aspect 
of  the  matter  and  throw  the  responsibility  upon  the  first  collecting  hands. 

Another  point : — the  bank — the  collecting  agent — which  undertakes 
to  handle  paper  for  tlmxl  parties,  and  has  the  misfortune  to  lose  the 
paper  in  the  mails,  in  such  case  is  the  sufferer,  and  must  bear  the  loss  or 
trouble  which  may  be  the  final  outcome  of  the  miscarriage. 

STRAY    COLLECTIONS-"  TRAMPS." 
Many  banks,  particularly  the  oldest  and  largest  banks  in  om-  cities 
and  large  towns,  are  in  the  frequent  receipt  of  paper — ^mamly  checks 
and  drafts  from  individuals  located  in  other  large  places,  where  there 


THE    COLLECTIOX    DEPARTMENT    AXD    MESSENGER.  99 

are  plenty  of  banks — which  paper  they  are  asked  to  collect  and  remit 
for.  There  ai'e  several  features  of  this  sort  of  business  which  are  of 
an  objectionable  character,  and  among  them  are  these  :  The  stray 
collections  which  I  am  referring  to  come  to  banks  from  parties  whom 
they  know  nothing  of,  with  whom  they  have  no  correspondence,  and 
who  have  no  claims  upon  them  whatever. 

This  deahng  with  entire  strangers,  who  may  have  no  character  or 
responsibility,  is  a  dangerous  business,  even  though  it  is  only  in  the 
way  of  a  small  collection  transaction. 

Tho  collecting  bank  is  obliged  to  remit  for  the  collections,  if  they 
are  paid,  its  check  on  some  central  bank,  most  usually  a  New  York 
bank.  And,  since  these  remitted  checks  are  small,  the  danger  in 
sending  them  to  unknowai  payees  is  evident. 

I  have  known  of  instances  where  a  collection  business  of  this 
description  has  been  ' '  cooked  up "  simply  as  a  means  of  getting 
hold  of  small  flrst-class  New  York  checks,  for  the  purpose  of  raising 
them  to  large  amounts.  Then,  again,  where  these  outside  collections 
come  from  parties  who  have  no  dishonest  intent,  they  are  quite  often 
collections  that  won't  collect  —  checks  that  meet  with  the  response 
of  "No  funds"  —  drafts  that  are  neither  accepted  nor  paid;  and,  as 
such  usually  come  without  funds  to  pay  for  their  return  in  case  of 
dishonor,  the  bank  receiving  them  does  business,  and  that,  too, 
of  a  responsible  character,  without  any  recompense  whatever.  If 
it  protests  the  unpaid  collections,  it  will  sometimes  receive  from  the 
senders  complaints  for  so  doing  and  a  refusal  to  remit  the  fees. 

Many  banks  have  taken  the  ground  that  they  will  not  do  any  of 
this  sort  of  business  wliich  I  have  been  describing.  They  mail  back 
to  the  remitters  their  collections  without  attempting  to  collect  them ; 
and,  as  they  come  from  points  where  there  are  home  banks,  ready 
to  do  any  fair  collection  business,  there  seems  no  particular  hardship 
in  this,  since  the  owners  of  the  collections  can  take  them  to  these 
home  banks  and  there  deposit  them  for  collection. 

The  action  I  have  last  named  is  the  only  positive  remedy  for  what 
is  getting  to  be  a  great  bother  with  many  of  our  city  banks,  since 
they  receive  in  almost  every  mail  batches  of  these  httle  irresponsible 
collections. 

But,  if  they  are  not  quite  ready  to  take  such  decided  action  as 
to  return  them,  the  hints  I  have  given  may  lead  to  the  exercise  of  a 
little  more  care  and  discrimination  in  domg  this  sort  of  business. 

There  is  no  better  way  for  emphasizing  still  more  strongly  tliis 
important  point  in  practical  banking  than  by  presenting  an  incident 
from  real  life  in  banking  which  bears  directly  upon  the  business.  We 
omit  only  the  real  names  which  figured  in  the  case : 

The  "  Rhodes  National  Bank,"  of  New  York,  received  for  collection 
from  John  Jones,  of  Boulder,  Colorado,  a  cheek  upon  the  Twelfth 
National  Bank,  of  New  York,  for  $1,000.     This  check  came  with  a 


100  PRACTICAL    BANKING. 

request  for  the  immediate  remittance  of  the  proceeds.  It  bore  upon 
its  back  several  apparently  regular  endorsements,  the  first  of  whom  was 
the  payee  of  the  check  and  the  last  John  Jones,  of  Boulder,  who  had 
endorsed  it  over  for  collection  to  the  Rhodes  National  Bank.  The 
Rhodes  National  Bank  collected  the  check,  and,  after  making  a 
deduction  of  75  cents  for  doing  the  busmess,  remitted  the  proceeds  to 
Mr.  Jones,  of  Boulder.  So  far  so  good.  But  two  months  after  came  a 
surprise.  The  collected  check  had,  within  that  time,  got  around  home 
to  the  drawer,  and  had  then  been  brought,  for  the  first  time,  face  to  face 
with  a  party  to  whom  the  payee  had  endorsed  it  over  in  remitting  it  to 
him  by  mail.  This  last  party  had  never  received  the  check.  It  had 
been  stolen  from  the  mail,  his  endorsement  forged,  and  the  check  passed 
off  upon  a  forged  endorsement,  cashed  by  Jolm  Jones,  of  Boulder, 
who  had,  as  described,  and  in  due  course,  forwarded  it  to  the  Rhodes 
National  Bank  for  collection  and  remittance.  The  surprise  named 
was  a  call  upon  the  Rhodes  National  Bank  by  the  last  endorser  to 
refund  the  money  because  it  had  collected  the  cheek  upon  a  forged 
endorsement.  The  bank  immediately  fell  back  upon  the  stranger, 
John  Jones,  but  within  the  two  months  that  had  elapsed  he  had  made  a 
bad  failure  and  little  or  nothing  could  be  obtained  from  hun.  He  had 
cashed  the  check  for  the  forger,  who  had  disappeared,  and,  though 
innocent  himself  in  the  transaction,  could  help  the  Rhodes  National 
Bank  but  little  in  the  matter.  The  bank  at  once  determined  it  would 
never  again  attempt  to  do  a  collecting  business  for  an  entire  stranger — 
a  tramp  cori'espondent  of  whose  responsibility  it  knew  nothing. 

COLLECTION  PROFITS  AND  EXPENSES-OLD  AND  NEW  SYSTEMS- 
In  old  times — say  thirty  or  forty  years  ago — under  old  State  banking 
laws,  and  old-fashioned  methods  and  machinery  of  doing  a  collection 
business,  each  bank  was  in  the  habit  of  selecting  its  collection  agents, 
sending  them  by  mail  theh*  collection  paper,  charging  their  customers 
very  substantial  rates  upon  all  such  paper,  and  passing  the  same  to 
their  credit  when  collected,  and  not  one  moment  before,  and  after 
deducting  from  each  item  the  heavy  exchange  charge.  I  was  long 
brought  very  closely  in  contact  with  business  of  this  sort,  as  it  was 
done  by  a  bank  which  had  the  largest  collection  business  of  any  in  the 
United  States;  and  I  can  remember  very  vividly  just  "how  we  did 
it."  I  have  in  my  eye  now  our  great  sheet,  on  whicli  we  had  arranged 
the  tariff  of  collection  charges  for  all  points,  far  and  near,  in  the 
United  States  and  Canadas.  Nothing  on  that  schedule  below  ^%,  even 
for  the  closest  home  points,  while  f  and  1^  were  very  common  charges 
where  the  paper  was  not  payable  in  our  immediate  vicmity.  But, 
when  we  came  to  notes  and  drafts  due  all  tlie  way  from  500  to  1,500 
miles  away,  in  certain  conditions  of  the  exchange  market,  2  and  3^ 
would  crop  out  as  an  exchange  charge. 

On  any  discounted  paper  wliich  was  not  payable  "in  town,"  the 
charges  for  exchange  were  large ;  and  the  exchange  item  on  the  books 


THE    COLLECTIOX    DEPARTMENT    AXD    MESSENGER.  101 

of  the  bank  Avas  always  sure  to  put  in  a  very  handsome  contribution 
to  the  net  earnings  account  when  the  semi-annual  dividends  were  being 
figured  for. 

But,  in  those  times,  there  was  a  comparatively  small  amount  of 
this  collection  business  to  be  done. 

The  countiy  merchant  paid  his  city  bills  by  getting  cheeks  on  the 
city  from  his  nearest  bank,  for  wliicli  he  paid  roundly,  or  by  sending 
the  cash. 

Nowadays  no  country  trader,  no  matter  whether  he  is  located  in 
Dead  wood  or  St.  Augustine,  thinks  he  is  in  fashion,  unless  hQ  "pays" 
his  New  York  or  Boston  bills  by  sending  there  liis  indiAddual  checks 
on  his  local  bank,  which  gets  all  the  advantage  of  his  deposit  till  the 
checks  come  round  for  collection  from  the  city  banks,  which  have 
given  their  dealers  immediate  credit  for  them,  and  made  no  charge 
for  then*  collection. 

The  establishment  of  the  National  bank  system  has  played  its  part 
in  this  enormous  increase  in  number  and  variety  of  the  checks  which 
are  to  be  handled  and  collected  by  the  city  banks  by  increasing  the 
pubhc  estimation  at  distant  points  of  hundreds  of  small  interior  banks 
whose  stability  and  character  are  generally  guaranteed  by  the  ' '  Na- 
tional "  part  of  their  title. 

And  tills  very  feature  of  confidence  in  such  banks  has  added  largely 
to  the  ease  of  collecting  such  checks. 

There  is  also  in  our  favor  at  the  present  time  the  very  marked 
increase  in  the  material  facihties  for  correspondence  and  travel. 

We  now  have  banks  in  all  places  of  much  business.  We  have 
express  trains  in  place  of  the  old-time  coaches,  and  we  have  mail  facili- 
ties that  are  far  in  advance  of  those  of  former  days. 

Then  we  have  the  great  express  companies,  for  the  leading  express 
companies  of  the  country  and  many  of  the  small  ones  are  managed 
with  a  skill  and  a  system  which  command  not  only  admiration  but  a 
very  large  patronage  frona  bankers.  There  was  a  banking  period 
when  the  express  system  was  not  in  existence.  In  those  days  of  a 
smaller  breadth  of  banking  than  at  present  the  banks  somehow  existed 
without  the  express  companies,  but  it  is  now  hard  to  see  how  they 
uianaged  to  do  without  them.  Into  towns  and  villages  where  there  are 
no  banks  or  bankers,  and  even  no  lawyers  or  notaries,  the  ubiquitous 
express  companies  now  stretch  then*  lines  of  connection  and  in  such 
places  do  for  the  banks  with  skill,  promptness  and  safety  a  collection 
business  wliich  it  would  be  almost  impossible  for  them  to  have  done  in 
any  other  way.  Some  banks  are  so  much  in  favor  of  express  companies 
as  collecting  agents  that  they  even  employ  them  fi*eely  in  the  work  of 
making  collections  in  cities  and  towns  which  are  supplied  with  banks. 
This  they  do  because  they  believe  the  express  to  be  often  the  quickest 
and  cheapest. 

The  details  of  the  work  have  been  brought  into  very  modern  and 


103  PRACTICAL   BAXKIXG. 

practical  shape  by  a  deal  of  experiuienting  in  the  way  of  shortening 
and  improving  records  and  forms. 

Any  banker  of  long  experience  can  easily  recall  the  days  when  stamp 
machines  for  endorsing  collection  paper  were  unknown. 

The  bank  officer  of  to-day  Avith  experience  of  the  days  when  the  pen 
did  all,  thinks  with  weariness  of  the  time  when  as  Corresponding  or 
Collection-Clerk  he  was  obliged  to  go  through  the  drudgery  of  writing 
all  the  payable-to-order  forms  on  the  back  of  the  paper  he  sent  away 
for  collection. 

Now,  the  flexible  hand-stamp,  of  most  useful  and  cunning  construc- 
tion, is  made  by  Messengers  and  junior  clerks  to  do  the  work  that  was 
only  done  in  former  times  by  the  pen  of  the  bank  officers  who  ran  the 
Collection  and  Correspondence  Departments. 

I  take  the  opportunity  to  insert  a  few  forms  which  may  be  helpful 
and  suggestive. 

To  save  even  the  slight  work  of  filling  m  the  name  of  a  payee 
Cashier,  where  small  collections  are  to  be  scattered  widely  among  cor- 
responding banks,  a  form  of  endorsement  of  this  type  may  be  allowed : 

PAY   ANY    NATIONAL   BANK 

or  order,  for  collection  for  account  of 

THIRD    NAT.  BANK,  TROY,  N.  Y. 

John  P.  Henry,  Cashier. 

The  safety  and  sense  of  this  endorsement  lie  in  the  fact  that  there 
is  little  danger  of  making  a  check,  forwarded  for  collection,  payable  to 
"any  National  bank,"  since  "any  National  bank"  may  be  presumed 
to  be  a  safe  correspondent.  If  by  chance  the  paper  so  endorsed  should 
fall  into  the  wrong  bank  such  a  mistake  would  lead  to  no  trouble, 
since  the  wrong  bank  would  be  only  too  glad  to  pass  it  along  to  the 
right  one  or  promptly  account  for  its  proceeds. 

There  has  sometimes  been  a  question  whether  unmatured  collection 
paper  in  the  hands  of  a  failed  bank  might  not  be  covered  into  its 
assets  by  creditors  of  the  suspended  institution. 

For  this  reason,  whether  the  order  be  general  as  above,  or  definite 
as  below,  the  phraseology  of  the  second  line  is  almost  universally  in 
use  among  our  best-managed  banks,  as  expressly  limiting  the  owner- 
ship and  interest  of  the  bank  to  which  it  has  been  sent: 

Pay  MERCHANTS   NATIONAL   BANK, 

N.  Y.,  or  order,  for  collection  for  account  of 

FIRST   NATIONAL   BANK,  of  Denver. 

C.  B.  GOULD,  Cashier. 

A  simple  and  concise  form  of  a  counnon  remittance  endorsement 

which  cannot  be  improved  is  simply 

Pay  to  the  order  of  JOHN  BRADFORD,  Cashier. 
THOS.  JONES,  Cashier. 
In  many  country  banks  the  Casliier  does  the  entire  work  of  the 
institution — opening  tlie  bank  in  tlie  morning,  discharging  the  duties 
of  Book-keeper,  Teller  and  Collection  Clerk  during  the  day,  and  shutting 


THE    COLLECTION   DEPARTMENT    AND    MESSENGER.  103 

up  at  night.  Bankers  who  are  thus  crowded  with  hard  work  soon  learn 
to  perform  every  branch  of  their  labors  in  the  easiest  manner.  They 
use  all  the  short-hand  processes  that  are  available  and  endeavor  to 
mark  out  new  quick  cuts  to  desired  results.  In  illustration  of  this 
point  take  the  following  cunningly-devised  form  of  a  letter  of  a  country 
bank  (see  Form  20)  for  returning  unpaid  collections  to  its  coiTes- 
pondents.  This  letter  inclosed,  as  will  be  seen  by  the  record,  an 
unpaid  draft,  to  which  the  drawee  had  replied  that  he  would  ' '  write 
the  drawer."  The  table  of  "excuses"  is  certainly  a  comprehensive 
and  ingenious  one: 


FIRST    N^TIOi^^L    B^IsTK, 


C^-^^<^u<pi  yy,  189  0 


Ira  ft  on     C.^y-i^-^T^^^Cd-  C^i./  c--(Ad-.     returned  herewith. 

Jtenaons  for  refusal  checked  beloiv. 

Express  charges cents,  which  please  remit.  S.  A.  MAY,  Cashier, 

Payment  refused,  no  reason  given.  Claims  credit  for  goods  retd. 

Acceptance    "        "        *'          "  Wants  extension  of  time. 

Notice  given,  but  no  response.  Account  not  due. 

Failed.  Never  accepts  drafts. 

Closed  up.  Cannot  pay  at  present. 

Not  in  town.  Does  not  owe  this. 

Parties  cannot  be  found.  Has  paid  bill. 

Refuses  to  pay  exchange.  Should  be  less  freight. 

Amount  not  correct.  Draft  not  according  to  agreement. 

Goods  not  received.  Will  send  check. 

Goods  not  satisfactory.  X  Party  will  write. 

Goods  returned.  Parties  have  written. 


Form  20. 

Under  the  pressure  of  the  increased  business  and  the  competition 
between  themselves,  the  banks  in  the  central  cities  find  it  necessary  to 
make  all  kinds  of  collection  contracts  with  banks  at  other  central 
pomts  and  all  over  the  country.  These  contracts  may  be  very  simple, 
perhaps  only  a  reciprocal  account,  Avhen  each  \vill  send  and  charge 
directly  to  the  other  all  cash  items  due  at  their  respective  locations, 
and  give  correspondingly  quick  credit  for  all  items  of  a  similar  descrip- 
tion received. 

But  arrangements  of  this  simple  nature  can  only  exist,  usually, 
between  a  few  banks  at  the  larger  points,  and  a  much  more  common 
form  of  contract  is  that  between  a  city  bank  and  some  centrally 
located  bank  in  a  neighboring  State,  by  which  the  latter  covers  for 
the  former  all  of  its  State,  or  even  a  lai-ger  section,  and  remits  periodi- 
cally, perhaps  once  a  week,  or  once  in  two  weeks,  without  any  charge, 
for  all  its  collections  up  to  that  date.      It  would  be  almost  impossible 


104  PRACTICAL    BAXKIXG. 

to  mention  the  great  variety  of  terms  which  are  found  in  these  different 
collection  contracts,  and  which  grow  out  of  the  desire  of  each  bank  to 
conduct  its  collection  business  by  the  best  system,  and  at  the  least 
possible  expense  and  the  minimum  of  work,  responsibility  and  delay. 

I  must  mention  one  bad  feature  which  seems  to  be  on  the  increase. 
I  have  seen  that  some  banks  send  their  collection  paper  to  the  points 
where  it  is  payable  over  routes  not  only  far  from  direct  but  so 
extremely  circuitous  as  to  throw  upon  the  senders  a  responsibility  for 
not  exercising  diligence  in  case  of  non-payment  and  return  of  the  paper. 
Interior  banks  are  constantly  competmg  for  the  Clearing-House  city 
banks'  work  of  collection  and  they  sometimes  contract  to  make  collec- 
tions for  districts  so  vnde  as  to  embrace  many  points  far  out  of  any  line 
in  which  they  might  naturally  form  the  connection  between  the  bank 
for  which  they  are  collecting  and  the  point  of  payment  of  the  paper 
received.  Banks  should  be  very  cautious  about  entering  into  wholesale 
collection  arrangements  which  have  this  element  of  danger  and  are  so 
unbusiness-like  in  their  character.  Where  the  paper  handled  is  small 
the  work  may  run  along  without  much  risk,  but  a  day  will  come  when 
a  check  or  draft  for  a  large  amount  may  linger  so  long  on  its  collection 
travels  as  to  take  on  an  alarming  aspect  if  after  many  days  it  returns 
dishonored  to  its  owners.  There  is  little  need  of  giving  any  pointed 
illustrations  of  the  objectionable  workings  of  these  around-the-horn 
methods  of  making  collections.  Every  banker  almost  daily  observes 
the  absurdity  of  some  collection  trades  of  this  description  which  have 
been  made  by  one  bank  or  another.  Not  infrequently  a  bank  in  a 
central  city  finds  collections  which  it  has  sent  to  a  bank  in  another 
State  1  o  be  collected  coming  back  again  tlirough  some  third  bank  to  be 
placed  once  more  in  its  collection  line  under  some  other  wholesale 
arrangement.  A  note  of  caution  in  regard  to  this  matter  should  be  all 
that  is  needed. 

Let  me  speak  also  of  what  I  will  style  appoint  of  honor. 

Banks  are  expected  to  be  exceedingly  systematic  and  correct  in  the 
administration  of  their  internal  affairs.  When  a  customer  goes  to  a 
bank  with  a  suggestion  that  there  has  possibly  been  an  error  in  its 
interest  computations,  notices  sent  out,  or  some  other  tiling,  he  often 
hedges  against  what  he  fears  may  have  been  his  own  error  by  venturing 
the  polite  remark,  "The  banks  are  always  right,  so  I  suppose  I  must 
be  wrong. "  Banks  should  be  correct  standards  in  matters  belonging 
to  a  higher  range  of  duties  than  the  management  of  the  internal  details. 
They  should  be  just  and  honorable  in  their  dealings  with  the  public 
and  with  other  banks. 

To  illustrate  : 

I  have  named  as  the  most  common  forms  of  collection  arrangement 
those  in  which  the  country  bank  makes  the  collections  over  a  large 
district  at  par,  remitting  for  the  same  once  a  week  or  once  in  ten  days, 
or  something  of  that  sort,  depending  for  its  remuneration  upon  the 


THE    COLLECTIO>'    DEPARTMENT   AND    MESSENGEK.  105 

average  balance  which  the  business  will  under  this  plan  yield.  So  far 
so  good.  The  collections  in  this  instance  may  be  supposed  to  range  in 
amount  from  checks  or  drafts  of  $10  to  those  of  §1,000  or  more.  But 
when  some  deposit  transaction  leaves  on  the  Iiands  of  the  city  bank  a 
draft  of,  say,  $25,000,  payable  at  a  handy  point  in  the  State  alluded  to, 
in  sucli  a  ease  the  duty  of  the  city  bank  would  be,  of  course,  to  send  it 
for  collection  to  the  correspondent  with  whom  it  has  made  the  ari'ange- 
ment  referred  to.  If  it  does  not  do  this  and  sends  this  large  collection 
to  some  other  bank  in  the  locality  where  the  draft  is  made  payable  for 
the  purpose  of  getting,  on  account  of  its  size,  a  cheaper  collection  rate 
than  it  would  receive  from  its  regular  correspondent,  it  violates  both 
the  letter  and  the  spirit  of  a  contract  wliich  it  has  deliberately  made 
and  commits  an  act  which  is  decidedly  repreliensible.  The  proper 
way  of  action  under  the  circumstances  would  be  for  the  city  bank  to 
do  as  it  had  agreed — send  the  large  check  to  its  regular  correspondent, 
simply  calling  attention  to  its  unusual  size  and  asking  on  that  account 
for  as  early  a  remittance  of  its  proceeds  as  the  collecting  bank  may 
deem  just  and  equitable  in  view  of  the  fact  that  the  periodical  remit- 
tance arrangement  was  not  based  on  the  expectation  of  such  large 
transactions. 

A  most  useful  record  is  a  carefully-indexed  book,  containing  a  full 
record  of  all  the  collection  arrangements  the  bank  has  in  force  with  the 
various  correspondents  to  wliom  it  is  in  the  habit  of  sending  paper  for 
collection  and  remittance.  Tlius,  for  instance,  it  may  be  desirable  to 
know,  on  tlie  instant,  what  sort  of  a  collection  trade  the  bank  has 
negotiated  with  its  corresponding  bank  in  Worcester.  An  immediate 
reference  is  made  to  the  letter  "  W"  in  the  indexed  manual,  which  may 
read  as  follows :  ' '  Worcester  remits  at  par  tliree  times  a  month :  reaches 
us  5th,  15th,  and  25th."  This  statement,  in  abstract,  is  easily  under- 
stood by  any  bank  man.  Useful  information  may  be  mcorporated  into 
this  handy  book  in  regard  to  collection  prices.  There  are  hosts  of 
points  in  all  parts  of  the  United  States  to  which  National  and  other 
banks  doing  a  large  collection  business  are  constantly  forwarding, 
for  collection,  notes,  drafts  and  checks.  With  these  points  tiiey  have 
no  fixed  collection  arrangements.  In  sending  paper  to  correspondents 
of  this  class  the  sending  bank  turns  to  its  banker's  almanac,  selects 
what  it  believes  to  be  the  best  bank  at  the  given  point — tlie  bank, 
perhaps,  ha%dng  the  largest  capital  and  surplus — and  to  that  bank 
sends  the  paper,  trusting  that  it  will  collect  it  promptly  and  at  a 
reasonable  price.  A  condensed  record  of  its  experiences  with  these 
"casuals"  should  be  made  in  the  lettered  collection  vade  mecum 
described,  so  that  the  cost  of  getting  home  the  funds  may  be  quickly 
arrived  at  in  any  futuie  time  when  paper  payable  at  that  point  maybe 
offered  for  collection  or  discount. 

So  far  I  have  considered  the  matter  of  collections  just  as  it  stands 
to-day,  but  Avith  the  exception   of  minor   changes  and   savings,  the 


106  PRACTICAL    BAXKIX&. 

banks  are  just  about  Avhere  they  were  thirty  years  ago.  Each  city 
bank  manages  its  country  collection  business  on  its  own  separate  and 
independent  basis.  It  makes,  as  far  as  practicable,  its  own  special 
collection  trades,  which,  as  I  have  said,  are  of  about  every  imaginable 
character.  One  country  bank  agrees  to  remit  once  a  week  or  twice  a 
week,  once  a  month  or  twice  a  month,  at  par.  Another  bank  prefers 
to  take  off  a  httle  something  as  an  exchange  charge,  and  remit  at 
once,  at  par.  Another  agrees  to  collect  upon  the  understanding  that 
the  bank  sending  collections  shall  keep  a  certain  permanent  balance 
\vlth  them. 

The  trades  are  well  enough  in  themselves,  but  what  should  be  done 
in  these  large  places  is  this :  All  the  banks  in  one  of  these  places  should 
combine  in  the  selection  of  one  of  their  number  to  do  the  collecting 
for  all. 

As  the  Boston  banks  have  looked  into  this  matter  somewhat  let  us 
see  what  they  found : 

Very  few  are  aware  of  the  magnitude  of  the  business  of  collecting 
checks  on  interior  New  England  banks  that  is  now  done  by  the  Boston 
banks,  or  the  rapidity  with  which  this  work,  wliich,  in  many  instances, 
is  w^ork  done  for  n(>thing,  at  one's  own  expense,  is,  mid  has  been, 
increasing.  In  an  able  report,  drawn  up  in  1877  by  Mr.  Gfeorge  Ripley, 
President  of  the  Hide  &  Leather  Bank,  it  was  stated  that  the  out- 
standing balances  of  the  Boston  banks  on  account  of  country  collections 
amounted  to  §2,100,000;  and  the  yearly  expense  of  makmg  these  col- 
lections Avas  then  estimated  at  $229,000.  The  annual  cost  of  this 
business  at  the  present  time  has  been  set  down  at  about  $400,000,  and 
the  outstanding  amount  of  the  Boston  banks'  uncollected  checks  now 
foots  up  over  $4,000,000.     This  is  the  situation. 

Now,  what  can  be  done  in  the  premises  to  improve  these  collection 
matters  ?  We  have  before  us  a  valuable  report  of  a  committee  appointed 
by  the  Boston  Clearing-House  Association  to  consider  the  subject  of 
New  England  collections,  which  presents  for  the  consideration  and 
acceptance  of  the  banks  a  plan  which  is  one  answer  to  the  question 
raised.  The  plan  of  this  intelligent  and  experienced  connuittee  looks  to 
the  establishment  of  an  agency  in  many  respects  quite  like  the  present 
Clearing-House,  wliich  shall  have  no  capital,  and  which  shall  nomin- 
ally make  no  charge  for  its  services,  but  whose  expense  shall  be  borne 
by  the  banks  in  proportion  to  the  business  done. 

Without  entering  into  detailed  explanation  or  discussion  of  the 
methods  and  machinery  proposed  by  this  committee,  we  propose  to 
present  what  may  possibly  appear  a  more  practicable  and  more  econom- 
ical scheme  for  doing  by  the  wholesale  this  country  bank  collection 
business,  which  the  banks  of  Boston  are  now  doing  in  a  retail  way, 
under  many  disadvantages  and  at  large  expense. 

In  1824  the  banks  of  Boston  found  themselves  encumbered  with  the 
labor,  risk  and  expense  of  sending  home  for  redemption  those  country 


THE    COLLECTION    DEPARTMENT    AND    MESSENGER.  107 

bills  of  New  England  banks  with  which  the  city  was  flooded.  After 
enduruig  for  a  time  the  retail  method  of  attending  to  this  work,  they 
finally  hit  upon  the  wholesale  idea,  and  inaugurated  the  Suffolk  Bank 
system,  the  methods,  machinery  and  complete  success  of  which  are  so 
familiar  to  our  bankers. 

And,  as  to-day  the  situation  of  the  Boston  banks  m  the  matter  of 
country  check  collections  is  relatively  the  same  as  it  was  sixty  years 
ago,  when  they  had  on  their  hands  the  problem  of  country  bill  redemp- 
tion, let  them  adopt  the  same  sort  of  remedy. 

Instead  of  organizing  an  independent  agency  for  doing  the  work 
in  hand,  let  them  contract  with  some  one  of  their  number  to  take 
on  the  business.  Any  well-managed  city  bank  will  find  little  difficulty 
in  the  work  of  simply  extending  its  collection  department  by  putting 
on  a  good  staff  of  corresponduig  and  assistant  Collection-Clerks,  and 
of  assuming  the  entire  country  collection  busmess  of  all  its  neighbor 
banks.  It  has  now  in  full  operation  all  the  methods  and  luachinery 
for  transacting  this  larger  work;  all  that  is  needed  is  an  increase  of 
power.  If  it  takes  on  the  country  collection  business  of  its  neighbors, 
it  will  only  have  to  make  its  regular  collection  letters  longer  and 
larger.  And  the  larger  business  will  enable  this  wholesale  collection 
bank  to  make  better  terms  with  eori-esponding  banks  in  the  country, 
while  corresponding  banks  will  also  reap  very  evident  advantages  from 
the  concentration  and  centralization  proposed.  Seventeen  hundred 
collection  letters  are  to-day  sent  out  from  the  Boston  banks  every 
twenty-four  hours,  although  there  are  only  277  towns  in  New  England 
which  have  National  banks.  Two  hundred  and  seventy-seven  daily 
letters  would  do  all  the  business  under  the  plan  proposed,  at  a  saving 
of  1,400  daily  letters. 

The  economy  of  the  plan  we  have  suggested  must  be  very  evident, 
since,  in  addition  to  the  savmg  in  the  matter  of  clerk  hire,  postage, 
stationery,  etc. ,  there  would  be  a  saving  in  the  point  of  expense  of  the 
executive  management  of  the  business,  a  department  which,  under  the 
plan  proposed  by  the  Clearing-House  Committee,  Avould  of  necessity 
be  costly. 

There  would,  in  fact,  be  no  question  about  the  economic  advantages 
of  the  plan  of  giving  the  collection  business  to  some  established  bank ; 
since  such  a  bank  is  already  in  possession  of  the  "  plant"  necessary  for 
the  transaction  of  such  business,  and  could  make  money  out  of  it, 
with  a  charge  for  exchange  which  would  not  support  an  independent 
Clearing-House. 

We  do,  of  course,  expect  to  hear  it  said  that  our  "  ideal  plan"  is  all 
very  well,  but  that  we  cannot  find  any  bank  ready  to  take  the  labor 
and  responsibilities  of  collecting  all  the  country  checks  for  all  the 
Boston  banks;  but  we  are  by  no  means  sure  of  this,  and  believe  in 
a  vigorous  hunt  for  such  an  institution,  and  what  we  say  of  Boston 
we  mean  should  apply  as  well  to  other  large  cities.     In  New  York, 


108  PRACTICAL    BAXKING. 

Chicago,  Philadelphia  and  dozens  of  smaller  places  the  plan  is  just 
as  practicable  as  in  Boston. 

As  regards  the  risks  of  the  business,  all  that  can  be  expected  of  any 
collecting  bank  in  city  or  country,  or  any  collecting  Clearing-House,  is 
that  they  Avill  consider  themselves  responsible  for  the  exercise  of  due 
care  and  diligence  in  the  matter.  The  individual  banks  sending  m  the 
collections,  or  the  indi^'idual  owners  of  the  checks  who  deposit  them, 
will,  under  any  system  of  collection,  have  to  bear  the  risks  that  are  in 
addition  to  those  we  have  named. 

There  are  many  incidental  points  of  advantage  m  the  wholesale 
system  of  collection  advocated  by  us  and  by  the  Clearing-House  com- 
mittee which  might  be  pointed  out,  had  we  space.  We  have  only  time  to 
note  one  of  these :  In  case  of  large  aggregates  of  collections  on  central 
points,  it  might  be  advantageous  for  the  city  collecting  bank  to  despatch 
special  messengers,  who  should  draw  such  checks  at  the  counters  of  the 
banks  upon  which  they  are  made,  returning  by  evening  express  trains 
with  their  hea^'y  invoices  of  city  funds  ready  for  the  ensuing  day's 
clearing. 

AVe  have  often  heard  the  late  Jeffrey  Richardson  tell  how,  in  the 
early  days  of  the  Suffolk  system,  he  and  the  late  William  Lawrence  had 
taken  a  carriage  and  pair,  loaded  up  ^\'lth  country  bank  bills,  which  were 
to  be  redeemed,  put  aboard  some  pistols,  and  driven  to  Newburyport, 
Portsmouth,  etc. ,  fetching  up  at  Groton  at  Mr.  Lawrence's  old  home, 
and  Anally  making  State  street.  To-day  there  are  many  interior 
central  points  in  New  P^ngland  which  could  be  reached  for  collection 
purjioses  after  morning  deposits  in  Boston,  and  which  could  give 
returns  in  season  for  next  morning's  clearing. 


THE  BANKS'  NOTARY   AND   PROTESTING.  109 


CHAPTER  VI. 

THE  BANKS'  NOTARY  AND  PROTESTING. 

In  notarial  business  tliere  are  some  points  of  interest  wliicli  may  not 
be  known  and  understood  by  all.  Any  one  can  protest  a  dishonored 
demand.  I  can  remember  well  when  it  was  the  custom  of  some  banks 
to  do  their  own  protesting — do  it  tlirough  their  own  unconnuissioned 
officers. 

Records  of  presentation  and  refusal  of  payment  would  be  formally 
made  on  a  bank  book,  kept  for  the  purpose,  by  the  clerks  of  the  bank, 
and  the  paper,  if  it  was  of  the  collection  class,  duly  returned  to  its 
owners,  with  a  statement  of  what  had  been  done,  in  the  way  of  demand 
and  notification.  These  record  books  went  into  Courts,  when  suits 
demanded  them,  and  they  had  good  standing  there.  I  have  at  hand 
one  of  these  old  style  protest  books.  And  even  in  these  days,  such  a 
book,  and  such  a  method,  have  their  places. 

I  sometimes  receive  circulars  from  National  banks  in  Southern  and 
Western  States,  asking  for  collection,  patronage,  which  say,  among 
other  things,  that  they  cannot  undertake  to  guarantee  protests  of 
dishonored  paper,  which  has  been  made  payable  in  places  which  have 
no  notaries  public.  But  these  banks  should  bear  in  mind  that  the  next 
best  thing  to  a  regular  commissioned  Notary  is  a  "layman,"  who  has 
intelligence  enough  to  serve  as  a  Notary — to  make  a  demand,  notifica- 
tions, and  a  record,  as  I  have  described  to  have  been  an  old-time  custom. 

Of  course  all  banks  understand  what  are  the  conspicuous  advantages 
of  a  regularly  commissioned,  and  sworn.  Notary,  with  a  big  seal,  formid- 
able blanks,  and  a  deal  of  experience  in  his  work.  His  seal  has  a  right 
of  way  in  Coui-ts  which  is  not  accorded  to  iinprofessional  work  in  the 
same  line.  Nothing  can  go  behind  it ;  there  is  no  need  of  collateral 
testimony,  witnesses,  etc.,  to  support  it.  The  seal  and  the  record,  if 
the  work  is  done  as  it  should  be,  stand  firm  without  aid  of  other  support. 

Never  fail  to  employ  notaries  to  do  notarial  work,  when  notaries  can 
be  reached. 

The  notaries  public  of  our  banks  are,  as  a  class,  skilful,  intelligent, 
and  faithful  men,  who  are  fully  aware  of  the  responsibility  and  delicacy 
of  their  work,  thoroughly  acquainted  with  the  laws  and  customs  that 
rule  their  trade,  and  also  men  of  courtesy  and  judgment,  for  they  have 
many  missions  of  a  delicate  and  annoying  character. 

They  hold  a  commission  which  is  of  very  ancient  origin,  and  under 
which,  in  some  ages,  very  important  and  curious  work  has  been  done, 


110  PRACTICAL    BANKING. 

that  is  to-day  altogether  out  of  the  notarial  sphere  of  action.  The 
trade  is  of  Roman  birth. 

In  Roman  days  the  Notarie  were  so  called  from  notae,  or  short-hand 
characters,  in  wliich  they  took  down  depositions,  and  minuted  instru- 
ments.    The  notaries  were  not  then,  as  now,  public  characters. 

From  Roman  times  to  the  present,  notaries  have  been  a  recognized 
"institution"'  in  all  civilized  lands.  In  France  they  have,  to-day,  a 
qualified  judicial  character.  In  Germany,  they  are  almost  always 
employed  to  make  wills,  fi-ame  appeals  and  draw  contracts.  In  England, 
where,  until  quite  recently,  they  held  their  appointments  under  the 
Church — receiving  their  commissions  from  the  Archbishop  of  Canter- 
bury—they administer  oaths  and  affirmations,  draw  deeds,  and  attest 
instruments  of  a  great  variety  of  description. 

"  Go  with  me  to  a  Notary  and  seal  me  there  your  single  bond,"  says 
Shylock,  that  old  note-shaver. 

In  the  United  States,  the  Notary's  best  hold  is  protesting  unpaid 
paper.     Sometimes  the  bank's  notarial  work  is  done  by  its  solicitor. 

But  whether  lawyers  or  "  laymen,"  they  ought,  in  order  to  do  their 
work  properly  and  Avith  safety  to  themselves  and  their  bank,  to  be 
thoroughly  conversant  with  all  the  laws  and  customs  relative  to  notes 
and  biDs — to  know  all  about  the  rights  and  duties  of  all  the  parties  to 
the  paper  they  handle. 

There  seems  little  excuse,  in  these  days,  for  the  enquiring  Notary, 
or  bank  officer,  to  be  long  deficient  in  any  of  these  points,  for  thorough 
and  concise  manuals  relative  to  these  matters  abound  on  every  hand, 
and  should  be  in  every  bank  and  notarial  library. 

The  bank  shovdd  never  hand  to  its  Notary  for  protest  any  piece  of 
paper  until  it  has  made  doubly  sure  that  its  non-payment  has  not  been 
brought  about  by  some  error  of  the  bank;  and  the  Notary  should  not 
do  the  final  work  of  protesting  till  he  has  given  parties  to  the  unpaid 
paper  reasonable  opportunities  to  correct  errors  that  have  been  made 
by  themselves,  or  some  one  else,  which  have  led  to  the  temporary 
dishonor  of  the  paper. 

And  it  seems  to  me  that  the  Notary  who  spends  liis  time,  after  bank 
hours,  in  running  around  after  promisors,  acceptors,  etc.,  who  have  not 
paid  their  maturing  paper,  and  who  finally  gets  its  face,  but  is  minus 
notary's  fees,  ought  to  be  compensated  by  some  one.  Common  sense 
would  suggest  that  that  some  one  should  be  the  party  whose  error  has 
led  to  the  non-payment  of  the  paper  at  the  proper  time  and  place — at 
the  bank  before  close  of  banking  hours. 

Of  course  where  a  Notary  is  doing  a  heavy  protesting  business  he 
can  afford  occasionally  to  make  such  a  collection  without  receiAing  a 
fee  but  the  unpaid  cases  should  be  the  exceptions. 

There  is  a  quite  wide-spread  impression  among  business  men — 
especially  among  parties  who  have  had  to  pay  many  protests  on 
paper  which  might  just  as  well  as  not  have  been  avoided  had  they 


THK    BANKS'   NOTARY    AND    PROTESTING.  Ill 

paid  proper  attention  to  their  business,  that  the  work  of  a  Notary  is 
liglit,  heavily  paid  and  quite  devoid  of  risks  and  responsibilities.  This 
is  far  from  being  the  case. 

The  notarial  profession,  like  all  others,  has  its  shady  side — its 
especial  cares,  responsibilities  and  labors  which  are  only  known  to  the 
experienced. 

Many  of  our  best  notaries  feel  a  deep  anxiety  about  their  work  and 
hold  that  it  is  by  no  means  overpaid.  Their  transactions,  of  which  the 
law  requires  they  shall  keep  a  full  and  accurate  record,  are  sometimes 
the  basis  of  sharp  legal  contests,  and  in  person  and  by  book  they  are 
often  summoned  to  the  witness  stand. 

I  have  known  faitliful  notaries,  who  have  been  very  much  burdened 
by  their  duties,  so  annoyed  and  badgered  by  suits  for  alleged  mistakes 
in  the  discharge  of  their  work,  and  by  otlier  causes,  as  to  be  anxious 
to  get  out  of  the  business. 

RESPONSIBILITY  OF  BANKS  FOR  THE  WORK  OF  THEIR  NOTARIES. 

There  is  a  question  of  interest  relative  to  the  connection  between 
the  banks  and  the  notaries  public  whom  they  use  which  should  be 
discussed  here. 

If  the  Notary  to  whom  the  bank  has  delegated  these  very  important 
and  delicate  duties  makes  an  error  in  his  work — if  for  instance,  in 
protesting  a  note  for  a  bank,  he  fails  to  make  the  proper  demand  upon 
the  promisor,  or  neglects  to  notify  the  endorsers  as  they  should  be 
notified,  and,  through  errors  of  this  nature,  brings  loss  upon  the  owners 
of  the  dishonored  paper — he  would  certainly  be  held  primarily 
responsible  for  such  loss. 

The  important  question  we  have  in  view  is  wliether  or  not  the  bank 
which  has  delegated  to  huu  these  duties  can  be  held  responsible  in  case 
the  Notary  has,  by  his  action,  incm-red  losses  which  he  is  himself 
unable  to  make  good.  This  is  a  point  which  has  not  been  legally 
settled.     There  are  no  decisions  on  record  covering  such  cases. 

To  avoid  risk,  it  is  certainly  desirable  that  this  agent  should  be  of 
some  financial  responsibility,  m  addition  to  his  other  qualifications. 

Our  own  opinion,  however,  is,  that  as  the  Notary  Public  is  a  State 
official,  a  sworn  and  independent  officer,  receiving  his  commission 
directly  from  the  Governor,  he  is  thus  rendered  solely  and  independ- 
ently accountable  for  the  results  of  the  work  which  he  performs  in  his 
official  character.  The  fact  that  he  has  been  specially  designated  by 
a  bank  to  perform  for  it  this  notarial  work  does  not  throw  upon  that 
bank  any  accountability  for  his  work.  He  is  not  really  the  agent  for 
the  bank,  and  is  not  so  viewed  from  a  legal  standpoint,  but  he  is  an 
employee  of  the  Commonwealth,  doing  for  the  bank  a  duty  which  it 
cannot  itself  perform  or  empower  any  one  but  such  an  officer  to  do 
with  the  same  effect.  Banks  are  certainly  responsible  for  agents  whom 
they  have  appointed,  but  they  are  not  responsible  for  work  done  by 
officers  in  who.se  selection  for  the  work  thev  had  no  hand,  and  whose 


112  PRACTICAL    BAXKIXG. 

duties  and  liabilities  are  specifically  described  in  the  statutes  of  the 
State  appointing  them. 

Tills  very  important  and  intricate  question  might  assume  a  far 
different  aspect  if  the  Notary  were  a  clerk  of  the  bank  for  which  he 
was  acting  as  Notary. 

There  are  no  legal  obstructions,  either  in  the  National  Bank  Act 
or  in  the  statutes  of  any  State,  to  the  assumption  of  notarial  work 
by  bank  employees  of  any  class,  and  officers  of  banks  quite  frequently 
hold  notarial  commissions.  But  it  is  certainly  an  open  question  whether 
such  a  combmation  of  duties  is  to  be  recommended  for  work  of  tliis 
delicate  and  responsible  character. 

It  has  been  urged,  Avith  no  little  degree  of  reason,  that  where  a 
bank  officer  serves  as  Notary  all  the  responsibility  and  risk  of  which 
we  have  spoken  might,  tlu*ough  that  one  fact,  attach  to  the  bank  of 
which  he  was  a  clerk. 

In  the  matter  of  the  delicacy  of  their  professional  duties,  it  may  be 

well  to  remember  that  there  have  been  cases  where  the  charge  has 

been  made  against  bank-officer  Notaries  that  they  have  been  unduly 

willing  to  protest  paper  which,  by  error  and  forgetfuhiess,  has  been  left 

unpaid  on  the  hands  of  their  bank,  when  a  little  extra  pains  on  their 

part,  as  bank  officers,  would  have  kept  the  paper  out  of  theu"  hands  as 

Bank-Notaries. 

PROTESTING. 

In  taking  in  collection  paper,  clear  instructions  should  be  obtained 
from  its  owners  as  to  whether  or  not  it  should  be  protested  in  case  of 
non-payment. 

It  by  no  means  follows  that  a  formal  protest  is  not  desired  because 
the  paper  bears  no  endorsements.  Many  banks  make  it  a  rule  to 
protest  all  unpaid  paper  unless  otherwise  ordered,  and  I  think  the  rule 
a  good  one. 

No  dishonored  paper  should  be  passed  into  the  hands  of  the  Notary 
by  the  Tellers,  or  any  subordinate  officers  of  the  bank,  until  it  has 
been  shown  to  the  Cashier  of  the  bank.  Protestmg  is  a  disagreeable 
last  recourse,  and  before  taking  this  step  the  bank  must  carefully 
assure  itself  that  it  has  discharged  every  previous  duty  to  the  paper, 
and  that  there  are  no  mistakes  hanging  over  and  about  it.  By  this 
course  much  ill  feeling,  suits  for  damages,  and  loss  of  money  by  the 
bank,  may  often  be  avoided.  Every  office-  of  a  bank  and  every  man 
issuing  paper  should  know  the  leading  points  relative  to  the  rights  and 
duties  of  promisors,  endorsers,  acceptors  and  drawers  of  paper,  and 
there  are  plenty  of  books  at  hand  which  will  post  him  up  in  these 
points. 

Below  is  given  in  detail  a  legal  point  or  two  that  belongs  to  this 
question  of  protesting : 

The  law  in  regard  to  protest  (takinfj:  the  word  in  its  strict  sense  as  the  act  of  a 
Notary  Public)  is  as  follows  : 

Protest  mi^st  be  made  of  foreign  bills.     The  only  exception  is  where  it  has  been 


THE    BANKS'   XOTARY    AND    PROTESTING.  113 

waived  bv  the  party  sought  to  be  charged,  or  where,  through  peculiar  circum- 
stances, protest  is  impossible,  e.  (/.,  where  no  notary  can  be  procured. 

Protest,  though  customary,  need  not  lie  made  in  the  case  of  inland  bills  or  of 
promissory  notes.  At  common  law  the  Notary's  certificate  is  not  even  admissible  in 
evidence  in  such  cases.  But,  in  Massachusetts,  by  statute,  the  certificate  is  made 
admissible  and  prima  facte  evidence  of  the  facts  stated,  in  case  of  all  bills,  notes  and 
orders.    The  States  of  the  Union  are  foreign  to  each  other  In  this  respect. 

As  the  liability  of  the  endorser  or  drawer  must,  in  general,  be  fixed  according  to 
the  laws  of  the  State  or  country  ivhere  the  dishonor  occurs,  it  should  be  noticed,  as  a 
possibility,  that  some  States  may  have  passed  statutes  modifying  the  common  law,  by 
requiring  the  protest  of  inland  bills  and  promissory  notes.  But  this  is  not  very 
probable. 

In  the  matter  of  protesting  sight  drafts  in  States  where  grace  is 
allowed,  there  is  a  point  of  interest  which  may  not  be  understood  by 
all  bankers.     It  is  this : 

Where  these  sight  drafts  are  received  for  collection,  it  is  not  always 
clearly  incumbent  upon  collecting  agents  to  protest  such  drafts  for 
both  non-aecptance  and  non-payment  in  cases  where  there  is  a  refusal 
to  honor  the  paper. 

If  it  seems  clear  that  there  is  no  possible  chance  of  the  ulthnate 
payment  of  the  draft — if  the  drawee  declares  positively  that  he  shall 
have  nothing  to  do  with  it — simply  extend  upon  it  a  protest  for  non- 
acceptance,  and  return  it. 

Wliere  a  maturing  note  is  payable  at  a  particular  point — at  some 
specially-named  bank,  for  instance — the  law  requires  that  it  must  be 
there  presented  before  it  can  be  protested,  and  within  hours  when  it  is 
customary  for  some  person  competent  to  answer  demands  for  payment 
to  be  present.  It  is  not  positively  necessary  that  the  demand  should 
be  made  during  what  are  considered  the  regular  business  hours  of  the 
office  where  the  paper  is  payable.  The  bank  may,  for  instance,  close 
at  2  o'clock,  but  if  its  responsible  officers,  who  are  competent  to  respond 
on  a  demand  of  this  character,  are  in  the  habit  of  being  there  until  3 
o'clock,  a  demand  upon  them  may  be  made  up  to  that  hour. 

While  I  have  advised  that  all  protesting  be  done  by  a  Notary  I  have 
said  that  imder  some  circumstances  ' '  protest "  may  be  effectually  made 
by  persons  holding  no  notarial  commission,  and  many  of  our  mterior 
banks  have  a  habit  of  treating  a  portion  of  their  endorsed  unpaid 
paper,  in  cases  where  it  is  their  own  property,  in  this  way.  If  they  are 
quite  confident  that  the  paper  will  be  ultimately  paid  by  some  of  the 
parties  to  it — that  it  has  simply  been  forgotten,  or  something  of  that 
sort,  and  that  there  is,  at  any  rate,  no  prospect  of  any  future  contest 
over  it — they  simply  make  upon  their  own  books  a  record  of  its  demand 
and  dishonor,  and  also  a  record  of  the  sending  out  of  notices  to 
endorsers — notices  sent  by  themselves. 

The  express  companies  have  to  act  on  tliis  principle  in  some  of  their 
collection  business.  "They  dislike  to  take  collections  on  points  where 
there  are  no  notaries.  Some  of  them  even  endeavor  to  decline  busmess 
of  that  class.  Yet  if  pressed  they  wUl  generally  give  way,  for  they  are 
prepared  to  get  along  with  their  non-payments  without  a  Notary  by  the 


114  PRACTICAIi    BAXKIXG. 

following  letter  of  instruction  (see  Form  21),  intelligently  drawn  up 
by  one  of  the  largest  Express  Companies  : 

EXPRESS   COMPANY. 

NOTICE   TO   AGENTS. 

The  collection  that  accompanies  this  is  due and  must  be  presented  to 

on  that  day  for  payment,  and  if  not  paid 

MUST  BE  PROTESTED. 
In  order  to  have  this  done  you  will  hand  it  to  a  Notary  Public,  or,  if  there  is  no 
Notary  Public  in  your  town  or  vicinity,  present  it  to  a  Justice  of  the  Peace  or 
Majristrate  for  that  purpose.  In  case  thei-e  is  no  Notary  Public  or  Justice  of  the 
Peace  in  your  vicinity,  YO0  nmst  make  the  demand  for  the  payment — this  should  be 
donein  presence  of  a  witness — and,  if  not  paid,  you  must  immediately  notify  by  mail 
each  endorser  that  demand  has  been  made  and  payment  has  been  refused  and  that 
the  holder  looks  to  him  for  payment.  This  notice  must  be  sent  l)y  the  first  mail  after 
the  demand  has  been  made,  and  you  must  be  prepared  to  prove,  on  your  oath,  the 
date  and  time  of  making  the  demand  and  of  msiiling  the  notices.  To  assist  you  in 
doing  this  you  had  better  make  some  memorandum  of  it  at  the  time.  In  case  you 
are  not  furnished  with  the  address  of  the  endorsers  you  should  write  the  notices  to 
the  endorsers  and  inclose  them  to  the  Agent  at  the  otBce  from  which  the  collection 
was  sent.    It  will  be  his  duty  to  mail  the  notices  to  the  proper  address  at  once. 

Unless  it  is  protested  on  the  day  it  is  due  the  endorsers  will  be  relieved  and  the 
Express  Company  will  be  made  liable. 

(Signed,)  ,  Manager  and  Sup't. 


(Form  21.) 
PROTESTING   LOST    AND    MISLAID    PAPER. 

The  exercise  of  due  care,  and  the  existence  of  a  proper  system  in  the 
admmistering  of  the  internal  affairs  of  a  bank,  will  reduce  accidents 
liinted  at  in  this  heading  to  the  minimum.  I  have,  elsewhere  in  these 
pages,  pointed  out  the  many  ways  in  which  losses  of  papers  in  banks 
and  by  banks,  in  the  transaction  of  their  inside  and  outside  work,  may 
be  avoided.  But  let  bank  officers  be  as  careful  as  they  may,  they  wiU, 
now  and  then,  lose  and  mislay  notes,  drafts  and  checks.  These  Avill 
sometimes  disappear  in  the  most  unaccountable  manner.  Sometimes 
the  lost  papers  will  suddenly  reappear,  and  quite  commonly  when  then* 
usefulness  has  long  come  to  an  end.  They  will  turn  up  in  overlooked 
corners,  in  books  into  whose  leaves  they  have  by  accident  been  shut, 
will  come  back  from  points  to  wliich  they  have  by  accident  been  sent, 
and,  in  other  ways,  will  come  home  Avhen  they  can  do  no  good,  to 
illustrate  by  their  career  the  total  depravity  of  inanimate  thmgs. 

Wlien  checks,  drafts,  notes,  etc. ,  are,  to  all  appearances,  lost  beyond 
all  hope  or  possibihty  of  an  early  recovery,  the  careful  banker  is  at  once 
on  the  alert  to  do  several  things,  which,  in  his  eyes,  appear  absolutely 
necessary. 

Papers  which  are  safe  enough  when  in  the  right  hands  may  become 
sources  of  danger  in  wrong  hands.  Where  these  valuable  papers  have 
disappeared,  as  described,  their  payment  must  be  duly  stopped,  at  all 
their  natural  paying  points,  by  the  most  careful  and  formal  notices. 
All  the  parties  to  the  papers  must,  if  possible,  have  early  notice  of  the 
loss;  and,  in  many  instances,  the  banks  Avhich  have  lost  the  papers 
assume  a  dangerous  responsibihty,  if  they  do  not,  at  once,  advertise 


THE   banks'   KOTAKY    AND    I'ROTESTINa.  115 

their  loss — a  responsibility  to  innocent  parties  who  may  unwittingly 
negotiate  the  lost  paper. 

I  have  known  many  instances  where  banks  have  suddenly  found 
missing — or  have  missed  finding — paper  wliich  was  maturing  on  their 
hands  and  which  must  be  collected  or  protested,  since  there  were 
endorsers  to  be  held  by  due  demand  and  notice  through  formal  protest 
by  Notaries. 

Sucli  a  situation  emphasizes  that  necessity,  of  which  I  have  in 
another  place  spoken,  that  a  bank  should  see  to  it  that,  as  far  as  prac- 
ticable, it  lias  on  its  record  books,  covers,  etc.,  a  full  descriptive  record 
of  all  paper  that  it  holds  for  discount,  or  has  taken  on  for  collection, 
and  that  it  does  not  depend  upon  the  cliances  of  some  one  else,  who 
has  an  interest  in  the  paper,  havmg  this  story  at  hand. 

For,  if  a  baink  has,  right  at  hand,  a  full  description  of  the  missing 
notes,  drafts,  or  other  documents,  it  can  make  demands,  receive  pay- 
ments, and  protest,  and  send  notices  of  dishonor  to  all  parties  to  the 
papers  in  an  effective  manner. 

PROTESTING   A   JOINT    NOTE. 

The  bank  had  for  collection  an  endorsed  note  whose  promisors,  in  a 
joint  capacity,  were  two  individuals,  one  residing  in  the  place  where 
the  bank  was  located  and  the  other  living  and  doing  business  in  a 
distant  city.  This  note  was  not  written  payable  at  any  particular 
point,  and  the  day  of  maturity  arrived  without  payment.  It  must  now 
be  protested,  and  the  question  arose  as  to  the  way  this  should  be  done, 
and  how  demand  should  be  made  and  notices  sent  to  firmly  hold  the 
endorsers. 

It  was  evident  enough  that  it  should  have  been  made  payable  at 
some  special  point,  but  it  had  not  been  so  framed,  and  what,  under  the 
circumstances,  must  be  done  with  it  ?  The  course  taken  was  the  only 
safe  one.  A  demand  was  made  at  once  upon  the  promisor  in  the  place 
where  the  note  was  held,  and  notices  of  his  dishonor  of  the  paper  sent 
to  the  endorsers.  Subsequently  the  unpaid'  note  was  forwarded  to  the 
city  where  the  other  promisor  was  located,  a  demand  made  upon  him 
for  its  payment,  and  notices  of  his  refusal  to  pay  promptly  sent  to  all 
the  endorsers.  There  was  a  legal  fight  over  the  note,  the  endorsers 
refusing  to  pay  on  the  ground  that  a  proper  demand  had  not  been 
made  on  both  the  promisors.  The  decision  fhially  reached  in  the  case 
was  that  the  holding  bank  could  not  have  done  better  in  the  matter 
of  demand  and  notices,  and  that  it  made  the  only  legal  protest  possible. 

NOTES  PAYABLE  AT  A  BANK. 
It  was  a  note  for  $5,000,  bearing  many  endorsements.  The  bank 
held  it  for  collection.  At  its  maturity  the  promisor  went  to  the  bank 
in  person  and  said  he  could  not  pay  the  note,  that  he  had  suspended 
payment,  and  that  there  would  not  be  the  sHghtest  use  in  taking  the 
trouble  to  present  the  paper  at  the  somewhat  out-of-the-way  bank  where 


116  PRACTICAL,  BAXKIXG. 

it  was  written  payable.  The  note  Avas  duly  given  to  a  Notary  to  protest, 
and  lie  was  told  that  the  bank  had  made  a  personal  demand  upon  the 
promisor  and  that  the  promisor  had  positively  refused  to  pay  it. 

The  over-zealous  Notary  followed  the  somewhat  risky  and  unusual 
course  of  making  out  his  protest  and  notifying  the  endorsers  without 
making  a  demand  for  the  payment  of  the  note  at  the  bank  where  it  was 
made  payable. 

A  lawsuit  over  this  method  of  protest  was  the  result,  the  endorsers 
taking  the  ground  that  they  were  released  because  the  proper  demand 
had  not  been  made  upon  the  promisor.  The  Court  held  that  the 
endorsers  must  pay ;  that  as  the  note  would  not  have  been  paid  if  it 
had  been  presented  at  the  bank  where  it  was  made  payable,  and  pay- 
ment had  been  personally  demanded  from  the  promisor,  who  had 
assured  the  holders  that  it  would  not  be  paid  by  him  under  any  cir- 
cumstances, there  was  no  loss  to  the  endorsers  through  the  alleged 
neglect  of  the  Notary,  and  that  they  had  not  in  any  way  been  placed 
at  a  disadvantage  by  his  coiu*se  in  the  matter. 

The  action  taken  in  this  case  by  the  collecting  bank  and  its  Notary 
is  not  by  any  means  one  to  be  recommended,  yet,  endorsers  of  paper 
should  be  taught  by  its  results  that  the  law  does  not  permit  them  to 
evade  responsibility  when  equity,  justice  and  common  sense  is  against 
them. 

NO  RESIDENCE  NOR  PLACE  OF  BUSINESS. 
The  man  bought  a  four  months'  note,  given  for  a  thousand  dollars, 
not  made  payable  at  any  particular  place.  It  bore  the  endorsement 
of  several  good  parties,  whose  places  of  busmess  or  residence  were 
well-known  to  the  owner  of  the  note ;  but,  as  for  the  promisor,  neither 
the  holder  of  the  note,  its  endorsers,  nor  any  one  else  who  was 
acquainted  with  him  accessible,  had  any  knowledge  of  liis  wherea- 
bouts. In  fact,  this  signer  of  the  paper  had  no  regular  place  of  busi- 
ness nor  known  residence. 

The  paper  remained  unpaid  at  maturity,  and  the  holder  being 
unable,  for  the  reasons  we  have  given,  to  make  any  formal  demand  upon 
the  promisor,  did  not  attempt  to  protest  it.  He  promptly  informed  the 
endorsers  of  the  note  that  it  had  not  been  paid,  but  did  not  himself, 
or  by  the  hands  of  a  Notary,  make  any  record  of  a  demand  upon 
the  promisor  on  the  day  of  the  matm-ity  of  the  paper.  The  endorsers 
took  exceptions  to  his  course,  and  refused  to  pay  on  the  ground  that 
the  holder  of  the  paper  had,  by  his  neghgence,  legally  released  them. 
In  the  legal  contention  that  followed  the  decision  was  reached  that 
where  a  promisor  has  no  known  location  there  is  no  absolute  need  of  a 
protest  to  hold  endorsers.  Though  such  may  now  be  the  law,  a  far 
better  course  of  action  in  cases  similar  to  the  one  we  are  describing, 
would  be  for  the  holder  of  the  unpaid  note  to  place  it  at  once  in  the 
hands  of  a  Notary,  and  liave  liim,  in  due  form,  record  the  fact  that  he 
had  made  diligent  and  ineffectual  search  for  the  promisor,  and  send  to 


THE    BAXKS'   NOTARY   AND    PROTESTING.  117 

all  the  endorsers  immediate  notice  of  this  fact  and  the  non-payment  of 
the  paper. 

GETTING   ACCUSTOMED    TO    BEING   PROTESTED. 

I  have  spoken  of  the  delicate,  and  often  painful  and  disagreeable, 
character  of  that  part  of  a  Notary's  labors  which  relates  to  protesting 
dishonored  paper.  He  is  often  called  upon  to  make  demand  and  send 
notices  of  dishonor  upon  paper  which  is  for  the  first  time  sent  to  protest 
— to  stamp  with  his  unwelcome  seal  names  which  have  for  generations 
stood  high,  and  which  have  never  before  been  placed  under  protest. 
At  such  times,  and  under  such  circumstances,  the  notarial  officer  is  not 
iniseldom  a  witness  to  no  little  mental  distress  and  depression  on  the 
part  of  promisors  who  are  placed  in  the  (to  them)  novel  position  of 
being  obhged  to  respond  "No  funds." 

Yet  the  reflections  I  have  here  indulged  in  are  a  httle  relieved  by  a 
bit  of  testimony  in  the  premises,  which  has  been  given  me  by  a  Notary 
of  large  and  long  experience.  He  fully  endorsed  all  I  have  just  said 
about  this  matter.  ''Yes,"  said  he,  "I  have  had  many  and  many  an 
experience  such  as  you  have  described.  I  have  entered  the  counting- 
rooms  of  old  and  honored  merchants,  whose  names  had  always  stood 
unquestioned,  to  hear  them  say,  for  the  first  time,  '  We  cannot  pay — 
we  have  suspended, '  in  a  way  so  despairing  and  sorrowful  as  to  excite 
my  deepest  sympathy.  But  human  nature  is,  my  dear  sir,  wonderfully- 
elastic.  It  would  surprise  you  to  see  how  quickly  people  of  this  sort 
will  get  reconciled  to  the  situation ;  how  soon  I  am  almost  welcomed 
with  a  very  cheerful  and  ghb  '  No  funds '  by  parties  who,  in  my  fu^t 
calls,  were  weU-nigh  prostrated  by  the  necessity  for  my  presence  and 
action. " 


118  PRACTICAIi    BACKING. 


CHAPTER  VII. 

THE    DISCOUNT    CLERK    AND    THE    LOAN. 

Banks  earn  dividends  by  loaning  their  money — by  keeping  up  tlaeip 
loan,  and  getting  remunerative  rates  on  it  and  by  not  making  bad  loans. 

A  portion  of  the  loans  of  many  banks  consists  of  investments  in 
sohd  bonds,  wliicli  require  little  attention,  cause  little  anxiety,  and  can 
be  depended  upon  as  a  reserve  nearly  as  reliable  as  legal  tenders,  or 
gold,  when  panics  and  deep  stringency  causes  the  Une  of  deposits  to 
waver  and  shrink.  But  the  bulk  of  the  loans  of  our  banks  consists,  of 
course,  of  commercial  paper,  and  time  and  demand  loans  upon  collat- 
erals of  many  descriptions.  What  with  the  demand  and  tune  paper  in 
the  files  of  the  average  bank  of  to-day,  the  entire  loan  will  generally 
average  due  (run  ofE)  in  sixty  days.  Thus,  a  bank  with  a  couple  of  millions 
capital,  a  half  million  surplus,  a  couple  of  millions  of  deposits,  that  may 
be  generally  depended  upon  to  stay,  and  a  juillion  of  circulation  which 
may  be  depended  upon  to  stay  out,  has  five  and  a  half  milMon  dollars 
to  keep  loaned,  less  reserves  held.  And,  divide  this  amount  by  sixty, 
and  you  have  the  amount  which  the  bank  managers  have  to  invest  in 
paper,  etc. ,  each  day.  That  is,  the  entire  loan  of  four  or  five  miUions 
rolls  over  in  sixty  days,  which  is  at  the  rate  of  about  eighty  thousand 
dollars  or  so  a  day. 

Now,  how  is  tliis  loan  kept  up  ?  In  what  way  is  this  daily  heavy 
investment  made  ?  Who  makes  it,  and  what  are  the  methods  of  pro- 
cedure m  buying  all  this  paper  and  loaning  all  this  money  on  collateral  ? 
In  these  premises  methods  vary  in  different  banks,  but  I  think  the 
various  ways  of  procedure  can  be  easily  and  concisely  explained. 
Keeping  up  the  loan  is  mainly  done,  as  we  have  mdicated,  by  intro- 
ducing into  it  discounted  business  paper;  for  properly  managed  banks 
generally  recognize  the  fact  that  their  charters  were  given  them  for  the 
purpose  of  establishhig  institutions  that  should  be,  to  a  certain  extent, 
the  wings  of  commerce.  The  chief  business  of  a  Board  of  Directors  is 
supposed  to  be  the  selection  and  purchase  of  this  paper.  For  tliis 
reason  it  is  highly  desirable  that  every  Board,  in  its  make-up,  shall 
represent  all  the  leading  branches  of  trade,  manufacturing,  etc.,  in  the 
district  where  the  bank  is  located ;  for  a  Board  of  this  varied  constitu- 
ency is  extremely  useful  in  discriminating  in  the  matter  of  credits. 

The  discount-seeking  paper  appearing  before  the  Board  comes  from 
depositors — dealers  with  the  bank  who  are  understood  to  stand  fii-st  in 
claims  upon  it  on  the  ground  of  the  value  of  their  current,  non-interest 


THE   DISCOUNT    CLERK    AND    THE    LOAN.  119 

paying  balances  which  they  keep  with  it.  Tlieir  claims  resting  on  such 
a  basis  must,  of  course,  other  tilings  being  equal,  be  gauged  or  graded, 
by  the  size  of  these  daily  balances. 

It  is  also  presented  by  outsiders — merchants,  brokers,  etc.,  who  have 
an  idea  that  the  bank  is  in  funds  to  discount  paper  in  excess  of  the 
regular  offerings  of  its  line  of  depositors. 

I  suppose  every  one  knows  that  in  these  modern  days  brokers  in 
paper — a  profession  hardly  known  40  years  ago — supply  a  vast  amount 
of  the  business  paper  which  lines  the  discount  trunks  of  our  banks,  and 
that  a  very  large  class  of  business  men,  who  keep  bank  accounts  and 
borrow  money,  prefer  to  borrow  through  these  paper  brokers. 

Paper  that  is  offered  between  Boards — and  Boards  usually  meet  but 
twice  a  week — is  generally  passed  upon  by  the  President,  Finance 
Committee  or  Cashier,  or  by  all  combined.  But  such  as  may  be  accepted 
is  all  "read  off"  at  the  first  meeting  of  the  Board;  and  in  the  best 
managed  banks,  a  single  growl  of  dissatisfaction  over  any  piece  of  paper 
taken  in  the  interim  named,  will  lead  to  its  earUest  possible  sale  from 
the  loan. 

A  "one  man  bank"  is  not  to  be  held  up  as  a  model. 

Dhectors  are  chosen  so  that  there  shall  be  a  division  of  responsibility 
and  that  wisdom  and  safety  which  comes  from  a  multiple  control.  And 
Directors  who  are  not  willing  to  attend  to  theirv  duties  and  assume  tlieir 
share  of  responsibility  ought  to  go  into  some  other  business.  And  any 
bank  President,  who  is  anxious  to  do  everything,  and  assume  all  the 
responsibility,  ought  also  to  go  into  some  other  business — perhaps  that 

of  private  banking. 

THE    DISCOUNT    CLERK. 

To  use  a  phrase  wliich  is  a  favorite  with  the  accomphshed  officers  of 
a  well-known  bank,  "  A  man  ought  to  have  a  good  head  on  him  for 
banking  "  to  make  a  competent  Discount  Clerk.  His  position  is  one  of 
the  most  important  in  the  bank.  His  duties  are  of  a  character  requiring 
skill,  rapidity  and  accuracy,  and  he  has  certainly  good  opportunities 
for  making  use  of  fine  abihties  for  figui-ing  and  systematizing,  as  there 
are  few  places  in  a  bank  where  short  and  intelligent  processes,  and 
bright,  advanced  ideas  in  methods  tell  better  than  in  the  Department 
of  Discount. 

His  position,  in  the  matter  of  promotion  line,  is  next  to  the  Cashier. 
Or  perhaps  we  had  better  modify  this  statement  a  little  by  saying, 
that  in  banks  which  have  both  Paying-Tellers  and  Discount  Clerks, 
these  officers  stand  on  about  the  same  round  of  the  ladder  up  which 
bank  officers  climb  to  the  offices  of  President  and  Cashier  in  those 
best-arranged  banks  where  civil  service  promotions  are  the  order  of 
march. 

The  nature  of  the  duties  of  such  offices  as  Collection  Clerk,  and 
Corresponding  Clerk,  are  of  a  character  somewhat  better  adapted  to 
qualify  theh  holders  for  the  higher  positions  of  Cashier  and  President 


120  PRACTICAL   BAIfKI^^G. 

than  are  those  of  Teller  and  Book-keeper.  But  able  clerks  may  take 
comfort  in  the  fact  that  it  does  not,  after  all,  make  much  difference 
how  a  man  starts  in  a  bank,  if  he  has  the  right  stull  in  him  i\^d  buckles 
down  early  to  the  resolution  to  learn  all  there  is  to  be  learned  about 
banking. 

Tlie  utmost  caution  and  carefulness  are  demanded  in  the  adminis- 
tration of  the  details  of  the  business  of  making  loans  and  discounts. 
This  division  of  the  bank  must  be  managed  in  a  most  systematic  and 
exact  manner.  Here  are  some  special  maxims  which  the  Discount 
Clerk  should  strictly  adliere  to: 

All  contracts  made  with  customers  for  money  advances,  either  in 
the  way  of  loans  or  discounts,  must  not  be  left  hanging  upon  the 
slender  and  easily  disconnected  thread  of  a  simple  verbal  engagement 
made  between  the  lending  bank  and  the  borrower.  Just  as  soon  as 
the  bargain  is  agreed  upon  a  clear  and  most  exphcit  entry  of  the  trade 
in  black  and  white  should  be  made  in  full  upon  that  book  of  the 
bank  which  is  known  as  the  Application  Book,  and  the  correct  and 
prompt  keeping  of  tliis  book  must  be  always  insisted  upon.  When  the 
record  of  this  negotiation  has  been  made,  it  should  be  marked  with  the 
appro\Tng  check-mark  of  the  Directors  of  the  bank,  signifying  that  it 
is  correct  and  as  agreed  upon  in  all  points. 

All  calculations  of  interest  and  all  filing  and  covering  of  notes  in 
the  Discount  Department  should  be  examined  by  a  second  pair  of  eyes. 
The  examiner  in  this  ease  may  be  detailed  from  any  other  dejjartment 
which  may  be  able  to  ofEer  for  the  imrpose  an  officer  who  has  the  time 
and  ability  to  do  work  of  this  class. 

In  his  intercourse  with  customers  of  liis  department  the  Discount 

Clerk  should  exercise  the  most  careful  judgment,  extreme  courtesy 

and  invariable  promptness.     He  should  carefully  avoid  making  any 

reference  to  the  special  duties  and  operations  of  his  department  out  of 

the  bank,  when  such  reference  can  by  any  possibility  lead  to  the  pubhc 

exposure  of  facts  which  it  may  not  be  advisable  to  have  known  outside 

of  the  bank. 

DISCOUNT   RECORDS. 

Some  banks,  and  some  even  which  are  large  and  systematically 
managed  institutions,  keep  no  sort  of  an  Application  Book.  The  person 
boiTowing  money  of  such  a  bank — making  a  loan  negotiation  with  it, 
of  any  sort — simply  goes  to  the  Manager,  shows  his  security,  makes  a 
verbal  trade,  and  passes  along  to  the  Discount  Clerk,  who  puts  the 
negotiation  through  the  books,  giving  the  borrower  his  money  or 
credit.  But  it  is  far  better  to  have  every  such  negotiation  entered 
first  upon  an  Application  Book,  where,  before  a  figure  is  made  upon 
the  other  regular  books  of  the  bank,  all  the  leading  facts  relative  to 
the  proposed  transaction  shall  be  clearly  recorded,  so  as  to  avoid  all 
mistakes  and  misunderstandings.  Under  the  old  State  banking  system, 
the  laws  of  many  States  required   that  every  bank  should  keep  an 


THE  DISCOUNT  CLEKK  AND  THE  LOAN. 


121 


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Application  Book,  and  also  obliged  the 
banks  to  enter  upon  this  book,  not 
only  ail  tlie  accepted  applications,  but 
all  the  applications  that  were  made, 
whether  they  were  accepted  or  not. 

I  have  before  my  mmd's  eye  one  of 
those  old-time  Application  Books  v/ith 
which  I  had  to  do.  It  was  a  cumbrous 
volume,  well  crammed  with  applica- 
tions of  every  name  and  nature.  When 
the  old-fashioned  State  Bank  Examiner 
came  along,  he  used  always  to  call  for 
this  book  and  look  it  over  carefully  to 
see  what  was  the  drift  of  the  discount- 
ing business  we  did  and  did  not. 

It  was  our  habit  to  paste  in  all  the 
original  application  letters  and  sheets 
and  bits  of  sheets;  so,  as  a  conse- 
quence, the  Application  Book  became 
in  time  a  crowded  scrap-book. 

It  should  certainly  now  be  an  iron 
rule  in  every  bank  to  have  every 
application  for  a  loan  that  has  been 
accepted  —  that  is,  every  trade  for 
paper,  etc. ,  that  has  been  made  by  the 
bank — at  once  recorded  upon  a  well- 
ordered  Apphcation  Book. 

Memory  is  often  treacherous ;  misun- 
derstandings are  always  turning  up; 
the  President  may  forget ;  the  customer 
may  forget,  or  misunderstand ;  so  put 
it  down  in  black  and  white,  at  once; 
and  then,  whether  the  paper  or  other 
security  come  after,  late  or  early,  there 
will  stand  the  terms  relative  to  it. 

Here  is  a  perfectly  simple  and  prac- 
ticable form  of  an  Application  Book, 
which  can  be  used  advantageously  by 
any  bank.     (See  Form  22.) 

I  once  knew  of  an  excellent  bank 
which  had  a  most  singular  experience 
with  its  President,  which  experience 
comes  under  the  head  of  discounting; 
and  I  think  it  just  possible  that  this 
bank  would  have  escaped  its  disagree- 
able complications  if  it  had  kept  a  good 


122 


PRACTICAL    BANKING, 


formal  Applieation  Book.    The  President  in  question,  a  most  able  and 
estimable  man,  began,  through  ill  health,  to  lose  his  mind  while  in 


PROM/SO  R 


ENDOfiSERS'-'COLLATfRAL 


PAYABLE 


Date -"'Time 


Disc.  Imi 


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Form  23— lelt-haiiil  page. 

harness.  His  condition  was  so  peculiar  that  his  weakness  was  at  first 
hardly  noticeable.  He  was  "solid"  in  every  direction  but  one,  and 
that  one  was  a  fatal  failing  for  a  bank  President.  He  suddenly  took  on 
the  idea  that  there  was  no  end — no  bottom  to  the  resources  of  his 
bank,  and  so  began  taking  every  piece  of  paper — every  loan  that  was 
tendered  him.  Brokers  presented  long  lists.  ' '  I'll  take  the  lot, "  was 
the  quiet  verdict  of  the  amiable  President.  As  may  be  supposed,  this 
sort  of  thing  did  not  go  on  long. 

The  most  formal  and  important  book  kept  by  the  Discount  Clerk  is 
the  one  in  which  he  enters  the  full  record  of  all  his  discount  transac- 
tions. Other  books  of  his  are  aids  of,  and  adjuncts  to,  this  book ;  this 
book  is  the  central  book  of  his  department.  On  pages  122  and  123  (see 
Form  23 — left  and  right-hand  page)  is  given  a  sheet  from  it — which 
readily  shows  its  entire  character.  This  form,  like  all  those  which  I 
present  in  these  pages,  is  from  a  book  in  daily  practical  use  in  a  bank, 
and  has  been  selected  from  many  styles  to  which  I  have  had  my 


THE    DISCOUNT    CLERK    AND    THE    LOAN. 


123 


attention  called.     The  figures  need  no  explanation.     Any  junior  bank 
officer  can  see  through  them  by  a  little  study. 


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Form  23— riglit-liancl  page. 
MATURITIES. 

Under  this  title  the  Discount  Clerk  keeps  a  book  which  is  a  record 
or  tickler  showing  a  complete  list  of  all  his  paper  arranged  in  the  order 
of  its  maturity,  and  each  piece  is  written  into  its  proper  place  in  the 
list  at  the  time  of  the  other  records,  that  is,  as  soon  as  it  becomes  the 
property  of  the  bank.  Such  a  list  should  show  when  the  paper  was 
taken  and  give  a  fairly  full  description  of  each  piece. 

A  good  point  which  has  been  put  in  successful  practice  under  my 
obser\'ation,  of  which  I  have  seen  the  value,  is  to  make  against  each 
note  a  minute  of  the  rate  at  which  the  paper  was  discounted. 

One  important  use  of  this  minute  can  be  made  when,  in  making  up 
semi-annual  statements  of  net  earnings  in  preparation  for  declarsjtion 
of  dividend,  an  endeavor  is  made  to  get  at  a  pretty  accurate  estimate 
of  interest  unearned. 

A  secondary  use  of  this  interest  record  is  that  wliich  the  bank 
Manager  makes  of  it,  when  he  turns  to  its  figures  to  discover  what  rate 


124 


PRACTICAIi    BANKIXG. 


lie  last  charged  on  a  maturing  note  which  now  comes  up  with  a  call 

for  a  renewal. 

MEMORANDUMS    AND    TICKETS. 

In  casting  interest  upon  paper  wliich  is  passed  into  the  loan  of  a 
bank,  and  the  net  proceeds  of  which  are  either  placed  to  the  credit  of 
■dealers  with  the  bank,  paid  at  once  to  borrowers  through  the  Paymg- 
Tellers,  or  remitted  to  them  by  mail,  it  is  extremely  desu-able  that  the 
parties  for  whom  the  discounts  are  m.ade  should  be  furnished  by  the 
Discount  Clerk  with  a  statement  in  detail  of  the  figuring  of  the  paper 
discounted,  recapitulating  the  dates,  time  to  run,  and  gross  and  net 
amounts  of  the  paper  and  interest  deducted.  This  can  just  as  well  as 
not,  be  made  out  in  a  neat  and  systematic  form  on  blanks  specially 
prepared  for  the  purpose.  Statements  so  executed  e\idence  a  thor- 
oughness and  intelligence  which  reflect  credit  upon  the  methods  of  the 
institution  employing  them.  Here  is  a  model  form  of  the  character 
^ve  have  suggested :     (See  Form  24.) 


yCMr^^t.^^-^    Memorandum. 


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Form  24. 

When  the  proceeds  of  the  paper  discounted  are  handed  to  a 
borrower  by  the  Paying-Teller,  or  passed  to  the  credit  of  a  dealer  Avith 
the  bank  by  the  Receiving-Teller,  one  of  these  statments  of  the  discount 
transaction  should  also  be  handed  over  to  the  customer. 

Wlien  the  discount  is  to  be  advised  or  remitted  by  mail  the  letters 
of  advice  or  remittance  should  also  cover  one  of  these  statements. 
They  are  of  special  convenience  to  the  Book-keepers  and  clerks  of 
those  parties  for  whom  the  paper  has  been  discounted,  and  tliey  fully 
appreciate  the  convenience  of  having  before  them  for  comparison  the 
bank's  statement  of  its  figuring  in  detail. 

Where  the  discount  operations  are  between  banks  and  corporations 
■which  are  subject  to  periodical  examinations  by  auditors  these  state- 
ments of  discount  transactions  are  also  particularly  serviceable. 
THE    DISCOUNT    CLERK    AND    THE    TELLERS. 

The  business  connection  between  these  officers  is  close  and  fre- 
quent, and  their  systems   of   transacting   details  of   matters  coming 


THE    DISCOU>'T    CLERK   AND   THE    LOAN.  125 

between  thein  and  intertwined  in  their  departments  should  be  of  the 
most  methodical  type.  Thus,  for  instance,  the  Payhig-Teller  is  being 
steadily  called  upon  by  the  Discount  Clerk,  in  a  bank  where  the  loanuig 
transactions  are  constant  and  heavy,  to  pay  out  over  his  counter  the 
proceeds  of  paper  discounted  or  of  loans  made.  In  the  press  of  business, 
and  when  customers  are  in  a  hurry,  the  Discount  Clerk,  may  be 
tempted  to  speed  matters  by  giving  hasty  verbal  orders  to  the  Paying- 
Teller  to  make  the  payments  in  question  with  the  understanding  that 
he  will  in  due  time  pass  over  to  the  Teller  the  written  pay -loan  ticket 
which  is  in  common  use  in  all  well-regulated  banks.  The  waiving  of 
the  immediate  use  of  this  ticket — and  indeed,  all  payments  upon  verbal 
orders — should,  if  possible,  be  avoided.  The  money  goes  out  in  such 
cases  voucherless;  and,  if  the  Discount  Clerk  happens  to  forget  to 
follow  the  payment  ^vith  the  ticket,  the  Teller  may  find  his  cash  in 
confusion  and  short — at  the  close  of  business.  Here  is  a  good  form  of 
a  pay-loan  ticket  (see  form  25) — an  order  which  should,  as  we  have 
said,  precede  all  payment  made  by  the  Paying-Teller  of  money  wliich 
has  been  negotiated  for  through  the  discount  department : 


^y-c/aJU^  jy, 

189^, 

Pay 

^-fz^^m 

afk^^% 

Charge 

Loan 

Sg^^n^^ed    (>W^^j    Discount 

Clerk. 

Form  25. 

Loans  made  by  a  bank  are  often  passed  to  the  credit  of  customers 
on  the  books  of  the  bank  instead  of  being  paid  out  over  the  counter — 
made,  or  added  to  a  credit  balance  upon  which  the  customer  is  to 
draw  at  his  pleasure.  In  such  a  case  the  Discount  Clerk  gives  to  the 
Receiving-Teller  a  similar  ticket  only  so  varied  as  to  be  a  "  Credit" 
instead  of  a  "Pay"  loan  ticket,  as  below.     (See  Form  26.) 


4    jy,     189^, 


Credit    Sa^n€^   Cy-Ui^^    '^-a.    ///0.0()0. 


Charge    Loan.       ^tZ^^c-ed     ^^fiS^€,     Disccunt  Clerk. 


126  PRACTICAL    BAXKIXG. 

In  this,  as  in  the  direct  payment  luade  over  the  counter,  the  Teller 
should  not  make  the  credit  until  he  has  received  the  ticket,  and  thus 
avoid  depending  on  the  discount  officer's  recollection  of  his  verbal  orders. 

The  Paying-Tellers  are  also  often  caUed  upon  to  credit  loan  with 
amounts  of  partial  payments  made  upon  demand  notes.  In  such 
cases  they  do  not  have  the  covers  of  the  notes  from  which  to  make 
their  credit  entries,  for  these  covers  remain  with  the  unsettled  notes 
in  the  hands  of  the  Discount  Clerks.  The  Paying-Tellers  will  therefore 
need  credit  tickets  which  may  be  of  tliis  description  and  the  Discount 
Clerk  cannot  feel  that  his  duty  is  done  until  he  has  made  sure  of  a 
proper  disposition  of  the  payment  received  by  furnisliing  the  Teller 
with  this  credit  ticket:     (See  Form  27.) 


TENTH   NATIONAL  BANK,  (^^/ jy,   189^. 

C  red  it i/i^^^^ _.....___._ „ 


C/4^-^^^^^^/^^^/^^^j^<^(S^^.  ^fy^O 


000 


Form  27. 

The  Discount  Clerk  should  take  special  pains  to  see  that  all  the 
entries  bearing  upon  or  connected  with  his  department  are  rightly 
made  by  the  Tellers.  This  he  can  do  by  daily  checking  off  at  the 
close  of  the  day's  work  the  entries  in  question  and  by  comparmg  his 
balances  with  those  of  the  Book-keeper. 

TAKING  CARE  OP  THE  NOTES. 

In  most  banks  both  the  discounted  and  collection  notes  are  placed 
in  wrappers,  or  what  banks  term  ' '  covers. "  The  notes  are  neatly  folded 
withm  these  covers  and  placed  in  files  in  the  order  of  their  maturity. 

Upon  the  face  of  the  cover  is  a  complete  description  of  the  enclosed 
note  and  a  proper  record  of  the  ti*ansaction  through  which  it  came 
into  the  bank ;  that  is,  in  the  case  of  a  discounted  note,  for  whom  it 
was  done,  when,  and  on  what  terms.  An  advantage  in  the  use  of 
covers  is  that  the  Clerk  has  a  clear,  systematic,  and  uniform  record 
from  which  to  make  the  entries  on  his  books. 

Again,  as  some  of  these  notes  are  payable  in  the  place  where  the 
bank  is  located,  and  othei's  payable  at  distant  points,  it  is  quite  an 
object  with  the  clerks  handling  them  to  have  some  easy  method  of 
distinguisliing  the  one  from  the  other  at  a  glance  as  they  rest  in  their 
files.  For  this  purpose  the  practice  of  using  covers  of  two  colors  has 
been  happily  introduced — a  plain  wliite  color,  for  instance,  for  the  in- 
town  paper,  and  some  clearly  distinctive  colored  paper  for  those  notes 
which  are  to  be  sent  away  for  collection.     A  more  modern  practice 


THE    BISCOUXT    CLERK    AND    THE    LOAN.  137 

than  covering  notes  is  tliat  of  filing  tlieui  away  in  portfolios.  These 
wallets  or  cases  are  divided  into  as  many  departments  as  there  are  days 
in  the  month,  and  there  are  also  in  steady  use  as  many  portfolios  as 
may  be  required  to  meet  the  month  demand  of  the  departments. 

ACCURATE    INTEREST. 

The  Treasury  Department  pays  accurate  interest,  founded  on  365 
days  in  the  year.  To  find  accurate  interest,  count  the  actual  number 
of  days,  find  one  year's  interest  on  the  given  sum  at  the  given  rate  and 
take  as  many  3G5ths  of  this  interest  as  there  are  days  in  the  given  time, 
thus:  Wanted  true  interest  on  $1,000,  at  6  per  cent.,  from  May  17th  to 
Jtily  18th,  or  62  days.  One  year's  interest  is  §60.  §60  h-  865  =  0.16438 
X  62  days  =  §10.19177,  or  §10.19  true  interest.  Or,  multiply  one  year's 
interest  on  the  given  sum  at  the  given  rate  by  the  actual  number  of 
days  and  divide  the  product  by  365,  thus :  §60  x  62  =  3720  -^  365  = 
$10.19177,  or  §10.19  accurate  interest. 

A   MARK  OF    OWNERSHIP.  • 

In  the  management  of  this  department,  as  well  as  in  the  manage- 
ment of  every  department  of  the  bank,  every  possible  check  against 
losses  by  errors,  carelessness,  and  dishonesty,  should  be  rigorously  put 
in  force.  Here  is  an  idea  in  regard  to  safeguards  in  managing  the  loan 
that  is  worth  considering  and  adopting : 

The  paper  in  this  department  is  negotiable  paper.  It  is  lying  along, 
in  its  progress  towards  maturity,  in  a  somewhat  exposed  and  unpro- 
tected situation,  unless  the  bank  places  upon  it  just  as  soon  as  it  comes 
into  its  possession — just  as  soon  as  it  has  purchased  it  by  discounting 
it — some  mark  of  its  proprietorship,  which  cannot  easily  be  removed. 
Otherwise,  what  is  to  prevent  an  unfaithful  officer  from  taking  it  from 
its  covers,  or  files,  while  it  still  has  time  to  run,  and  marketing  it 
through  unsuspectmg  note  brokers,  etc.  ? 

Examinations  of  the  notes  discounted  by  Directors  are  rare,  and 
such  abstractions  might  remain  undiscovered  for  months.  I  have 
known  of  such  abstractions,  and  I  have  known  them  to  remain  unde- 
tected for  a  long 'time. 

I  have  this  suggestion  to  make  in  the  premises:  Let  every  piece  of 
paper  be  stamped,  as  soon  as  taken  on  by  the  bank,  with  a  stamp 
placed  over  the  endorsement  of  the  papei",  in  this  busmess-like  man- 
ner:  "  Pay  to  the  order  of  the National  Bank." 

If  paper  is  foreign  paper  to  be  sent  away  in  due  tune  for  collection, 
this  stamping  comes  in  all  right ;  for  it  has  only  to  be  completed,  by 

the  addition  of  an  endorsement  of  the  National  Bank  to  pay 

to  the  order  of  its  foreign  collection  agent,  to  put  it  in  a  negotiable 
condition — in  a  shape  to  be  sent  along  to  its  point  of  payment,  for  col- 
lection and  credit,  or  remittance. 

If  it  is  home  paper  that  is  to  be  collected  oyer  the  counter  of  the 
bank — all  that  remains  to  be  done  when  it  has  been  paid  is  to  receipt 


128  PRACTICAL  BANKING. 

it — to  put  a  Teller's  stamp  upon  it  signifying  that  it  has  been  paid  to 
the National  Bank. 

Another  way  of  placing  the  bank's  mark  of  proprietorship  upon 
the  discounted  paper  is  by  embossing  upon  it  a  stamp  of  ownership 

after  this  style:     "The  property  of  the National  Bank."     The 

only  objection  to  these  suggested  plans  is  tliis :  Banks  may,  for  occult 
reasons,  wish  to  take  paper  from  their  discount  files  and  sell  it  tlirougli 
outside  parties  in  open  market.  If  offered  in  market  through  paper 
brokers,  etc. ,  with  any  evidence  upon  it  of  its  previous  OM-nership  by 

National  Bank,  it  might  appear  as  if  the  bank  had  become 

alarmed  about  its  standing,  and,  for  that  purpose,  was  trying  to  shove 
it  off.     But  the  advantages  of  the  plan  overtop  the  objection. 
CASTING    INTEREST. 

Banks  live  upon  interest.  To  calculate  it  rapidly  and  correctly  is 
an  accomplishment  that  the  bank  officer  must  at  once  acquire  if  he  has 
to  do  with  the  discounting  or  collection  departments;  and  it  is  also  a 
quaUfieation  quite  likely  to  be  brought  into  requisition  in  any  depart- 
ment of  banking. 

There  is  no  class  of  bank  service  in  which  practice  tells  more  efiect- 
ively  than  in  interest-casting. 

Notliing  but  practice  can  make  an  expert  and  correct  Interest  Clerk; 
and  there  seems  to  be  scarcely  a  limit  to  the  skill  which  constant  prac- 
tice in  this  hne  may  bestow. 

There  are  a  vast  number  of  rules  in  vogue  for  casting  interest.  The 
bank  officer  can  select  from  these,  in  the  various  manuals  upon  the 
subject,  according  to  his  tastes.  But,  in  time,  if  he  works  largely  upon 
interest,  he  will  get  beyond  most  rules,  and  work  mainly  by  precedents, 
and  by  what  may  be  termed  inspection,  acquiring  finally  such  expert- 
ness  that  he  will,  to  the  inexperienced,  seem  to  have  Avell-nigh  the  power 
to  see,  at  a  glance,  what  discount  is  to  come  out  of  the  note  which  is 
before  him. 

I  give  a  few  specimens  of  interest  rules — here  is  one  which  is  a 
favorite  with  many  Discount  Clerks,  but  which,  like  all  such  rules, 
would  only  be  used  when  no  shorter  methods  of  getting  at  the  right 
results  presented  themselves. 

This  rule  is  to  fh-st  get  the  interest  at  6  per  cent.,  by  multiplying  tJie 
principal  by  half  the  number  of  the  months  and  one-sixth  the  days,  and 
then  reach  other  rates  by  additions  and  deductions  as  I  explain. 

Thus,  given  the  question  of  the  interest  on  §10,000  for  4  months 
and  6  days,  we  make  the  following  figures : 

One-half  of  the  months  is  two,  or,  in  other  words,  two  per  cent., 
and  one-sixth  of  the  days  is  one,  or  one-tenth  of  one  per  cent.  This 
gives  .  021  as  a  multiplier.  "With  $10, 000  as  the  multiphcand,  the  product 
will  be  210,000,  or  $210,  which  is  the  correct  interest  on  the  sum  given, 
for  the  time  named,  at  6  per  cent. 

Now,  if  you  are  after  tlie  intwest  at  some  other  rate  than  6  per  cent., 


THE   DISCOUNT   CLERK    AND    THE   LOAN.  129 

aliquot  parts  of  the  six-percent,  result  may  be  added  or  subtracted  as 

follows : 

For  10  per  cent,  nrtd %  For  5  ppr  cent  subtract 1-6 

For  9  per  cent,  add ]4  For  4>^  per  cent,  subtract ^ 

For  8  per  cent,  add ]^  For  4  per  cent,  subtract J^ 

For  7J^  per  cent,  add ^4  For  3  per  cent,  subtract 14 

For  7  per  cent,  add 1-6  For  2  per  cent,  subtract % 

Most  of  the  usual  modes  of  easting  interest,  like  the  preceding  rule, 
are  founded  upon  the  idea  that  the  year  is  cut  into  twelve  months  of 
thirty  days  each.  Though  this  is  not  exactly  correct  the  results 
obtained  are  sufBciently  exact  for  most  practical  purposes.  Again,  we- 
see  that  at  six  per  cent,  per  annum  the  interest  on  $1  for  one  year  is. 
six  cents;  for  two  months,  or  sixty  days  (one-sixth  of  a  year),  it  is  one- 
cent,  or  one-hundredth  of  one  dollar ;  for  six  days  (one-tenth  of  sixty 
days)  it  is  one  mill,  or  one-tliousandth  of  one  dollar.  Hence  to  find 
the  interest  for  two  months  point  oflE  the  two  right  hand  figures  of  the 
dollars  as  decimals,  thus : 

The  interest  on  $3,530  for  two  months  is $25  3a 

The  interest  on  $2,530  for  six  days  is $2  53 

And  the  interest  on  $2,530  lor  two  months  and  six  days  is $27  83 

I  have  alluded  to  the  short  process  of  interest-casting  adopted  by 
expert  Interest  Clerks.  Here  are  a  few  explanations  of  these  methods, 
by  the  use  of  which  such  clerks  reach  interest  products  with  the  use 
of  very  few  figures  and  little  time.  They  operate  from,  and  by,  any 
number  of  interest  precedents  which  long  thought  and  practice  in  the 
business  of  casting  interest  have  firmly  established  in  their  minds. 
Given  any  sum  and  any  time,  they  select  from  these  lines  of  precedents 
the  fitting  ones,  and,  by  their  aid,  leap  quickly  to  the  desired  interest 
results. 

I  have  now  in  mind  such  points  of  departure  for  interest  calculations 
as  those  mentioned  in  my  last  illustration. 

I  list  here  a  number  wliich  are  all  based  upon  the  standai'd  principle 
that  in  two  hundred  months  simple  interest  at  6  per  cent,  will  equal 
the  principal.  Now,  dividing  the  two  hundred  months  into  aliquot 
parts,  we  see  that  the  interest — 

For  2  months,  or  60  days,  is  1  per  For  12  days  it  is  2-10  of  1  per  cent, 

cent,  of  the  principal.  For  15  days  it  is  J4  of  1  per  cent. 

For  3  months  it  is  1}4  per  cent.  For  18  days  it  is  3-10  of  1  per  cent. 

For  4  months  it  is  2  per  cent.  For  20  days  it  is  1-3  of  1  per  cent. 

For  1  month  it  is  }4  per  cent.  For  24  days  it  is  4-10  of  1  per  cent. 

For  6  days  it  is  1-10  of  1  per  cent. 
These  are  only  a  few  simple  illustrations  on  this  pomt.  The  experi- 
enced Discount  Clerk  has  his  head  full  of  interest  data  of  the  character 
I  have  named;  and,  when  an  inexperienced  person  sees  him  figure 
interest,  almost  without  the  use  of  figures,  he  may  understand  that  his 
method  is  not  based  upon  rules  found  in  arithmetics,  but  upon  long 
practice  in  getting  at  interest  by  all  sorts  of  mental  calculations. 

And,  if  tills  interest  expert  is  asked  to  tell  another  person  how  to 


130  PRACTICAL    BANKING. 

cast  interest  quickly — how  to  do  it  as  he  himself  does  it — he  can  only- 
say  that  he  cannot  teach  him  directly  how  to  do  it,  but  can  tell  liim 
how  he,  in  time,  may  teach  himself  how  to  do  it  —  may  study  and 
practice  himself  into  it. 

The  precedents,  or  data,  which  I  have  just  listed  are  all  based  on  a 
6  per  cent,  rate  of  interest,  and  results  reached  by  them  require,  of 
course,  to  be  varied  for  other  rates,  as  shown  in  my  first  example.  I 
have  known  clerks  who  were  not  only  thoroughly  at  home  in  these  6 
per  cent,  periods,  but  had  in  constant  use  similar  data  for  such  rates 
as  4  and  4^  per  cent. 

Thus,  for  4  per  cent,  they  started  with  the  fact  that  three  months' 
mterest  was  1  per  cent,  of  the  principal,  and  nine  days'  was  one-tenth 
of  1  per  cent.,  and  used  multiples  and  fractions  of  these  periods  just  as 
we  did  above  of  two  months,  and  six  days.  For  41  per  cent,  the  periods 
would  be  80  days,  and  8  days ;  and  I  add  an  illustration  of  this  manner 
of  tigurmg  4  per  cent,  interest : 

To  find  the  interest  upon  any  given  sum  for  any  number  of  days  at  4  per  cent., 
point  off  three  places  as  the  interest  for  9  days,  and  proceed  with  9  as  the  factor  iu  the 
same  way  as  you  do  with  6  in  6  per  cent,  interest. 

The  interest  upon  any  given  sum  for  6  days  at  6  per  cent,  is  the  same  as  9  days' 
interest  upon  that  sum  at  4  per  cent. 

The  interest  tor  6  days  upon  $0,000  at  6  per  cent,  is  $6.00. 

The  interest  for  9  days  upon  $0,000  at  4  per  cent,  is  $6.00. 

EXAMPLES. 

Find  the  interest  upon  $1,000  for  36  days  at  4  per  cent. 

THE    OLD    WAY. 

Point  off  three  places  $1,000.00  interest  for  6  days  at  6  per  cent. 
Multiply  by  6 ;  as  6  in  30  goes  6  times 

and  result  is $0.00  interest  for  36  days  at  6  per  cent. 

Talie  off  one-third  $2.00  to  make  interest  4  per  cent. 

And  we  have  $4.00  interest  at  4  per  cent. 

THE   NEW    WAY. 

Point  off  three  places      $l,(X)i).00  interest  for  9  days  at  4  per  cent. 
Multiply  by  4;  because  36  days   is  4 

times  9  days,  and  we  have $4.00  interest  for  36  days  at  4  per  cent. 

Find  the  interest  upon  $3,000  for  39  days  at  4  per  cent. 

THE    OLD    WAY. 

Point  off  two  places  and  divide  by  a  as  the  interest  for  30  days,  or $15.00 

Point  off  three  places,  as  6  days'  interest,  or 3.00 

Divide  this  $3  by  2,  as  3  days  interest,  or 1.50 

And  we  have  as  a  result  39  days'  interest  at  6  per  cent.,  or $19.50 

Now  take  off  one-third  to  make  interest  4  per  cent.,  or 0.50 

And  wo  have  the  interest  at  4  per  cent.,  or $13.00 

THE   NEW  WAY. 

Point  off  3  places  as  interest  for  9  days  at  4  per  cent,  and  we  have  $3.00.    Now  9 

into  39  will  go  4  times,  and  3  remaining.    4  times  $3.00  is  $12.00,  the  interest  for 

36  days.    The  interest  for  9  days  is  $3.00,  and  for  3  days  it  will  be  one-third  as 

much,  or  $1.00.  This  added  to  the  $12.00  makes  the  interest  $13.00,  same  as  above. 

FORM    OF   OPEIIATION 

$3,(0  X  4  =  $12.00 

One-third  of  $3.00         =      1,00 

Which  makes  $13.00  interest  at  4  per  cent. 


THE   DISCOUNT    CLERK    AND    THE    LOAN.  131 

INTEREST  TABLES. 
These  have  their  place  hi  practical  banking,  but  they  do  not  fill  a 
very  large  vacancy.  Discount  Clerks  make  but  infrequent  use  of  them 
and  very  many  people  never  think  of  referring  to  their  pages.  Experts 
in  casting  interest  and  men  who,  like  Discount  Clerks,  are  at  all  times 
up  to  their  eyes  in  calculating  interest  have  not  the  patience  to  turn  to 
interest  tables  for  aid  or  even  confirmation  in  the  work  of  making 
interest  calculations.  Their  short-hand  processes  of  casting  interest 
are  the  fruits  of  constant  practice  and  quicker  and  better  than  any 
table  processes.  The  experience  of  most  practical  bankers  tallies  with 
each  other.  A  discount  officer  may  be  for  years  in  a  large  bank,  where 
scores  of  small  business  notes  are  almost  daily  ground  through  the 
loaning  mill,  and  have  standard  interest  tables  of  the  period  lying 
around,  yet  not  make  any  use  of  them  except  for  occasional  reference 
where  there  are  stubborn  cases  of  variance  in  figures  between  himself 
and  the  dealer.  For  a  use  of  this  kind  these  tables  may  once  in  a 
while  be  in  request  and  for  this  reason  every  bank  should  have  them 
in  its  library.  It  would  be  out  of  place  to  attempt  to  decide  which  is 
to-day  the  best  book  of  interest  tables  in  the  market.  The  advertise- 
ments in  the  bankers'  periodicals  present  tlae  claims  of  various  interest 
manuals,  and  there  are  many  good  ones.  Bank  officers  who  wish  to 
use  such  a  book  can  easily  tell  by  examination  which  suits  them  the 
best.  They  are  all  alike  in  their  leading  feature  of  bringing  together 
within  their  two  covers  what  may  be  described  as  a  vast  number  of 
interest  solutions — answers  to  interest  conundrums,  based  on  wide 
ranges  of  time  and  rates.  But  there  are  different  ways  of  arranging 
these  books  of  tables,  and  upon  the  merits  of  their  arrangement  their 
value  hinges.  The  interest  results  have  of  course  to  be  brought  within 
limits  to  be  determined  by  the  question  of  convenience  ui  hunting  up 
the  needed  replies,  and  a  table  which  attempts  to  give  too  many  rates 
and  dates  must  be  very  skillfully  arranged  not  to  defeat  the  end  aimed 
at  by  making  the  task  too  hard  and  long  of  hunting  up  and  applying 

its  solutions. 

CALCULATING    TIME. 

In  the  work  of  calculating  time  on  business  paper — on  notes  and 
acceptances — bank  clerks  apply  the  methods  common  with  them  in 
casting  interest. 

That  is  they  do  not  work  so  much  by  rules  as  they  do  by  short-hand 
mental  processes.  And  the  expertness  they  acquire  in  this  sort  of 
business  can  only  be  reached  by  long  practice. 

Place  before  me  a  pile  of  a  hundred  notes  and  acceptances,  drawn 
upon  months,  and  I  can  easily  calculate  the  time  of  their  maturity  as 
rapidly  as  they  can  be  placed  before  my  eyes — that  is,  I  can  tell  when 
they  are  due  at  a  glance. 

If  drawn  on  days,  it  will,  of  course,  take  me  longer  to  make  out 
when  they  are  due.      There  is  nothing  wonderful  about  this.      The 


132 


PRACTICAIi   BANKING. 


ability  to  do  this  sort  of  work  so  rapidly  comes  from  the  long  practice 
I  have  had  at  it. 

But  I  can  easily  give  a  learner  a  hint  or  two  relative  to  this  business 
of  acquiring  expertness  in  calculating  time.  If  he  is  a  Discount  or 
Collection  Clerk,  let  him  go  to  work  in  this  way.  Number  the  13 
months  of  the  year  by  arranging  them  in  a  tabulated  form  in  this  style : 
(See  Form  28.) 


1 

2 

3 

h 

5 

6 

7 

S 

9 

10 

11 

12 

Jan. 

Feb. 

Mar. 

Apr. 

Mat. 

JtTNE. 

July. 

Aug. 

Sept. 

Oct. 

Nov. 

Deo. 

IS 

Ik 

15 

16 

17 

18 

19 

20 

21 

22 

23 

2U 

Form  28. 

Then  let  him  get  this  table  by  heart — firmly  fix  it  in  his  mind  so  that 
it  will  be  constantly  available  to  him.  Having  done  this,  getting  at 
the  time  of  maturity  on  paper  that  is  drawn  on  months  is  as  easy  as 
adding  nine  and  six. 

Thus,  for  instance,  I  hold  before  him  a  note,  dated  September  6th, 
payable  in  6  months.  September  to  him,  by  our  table,  is  the  9th 
month ;  9  and  6  make  15.  March  is  the  15th  month.  The  note  is  due 
March  6th-9th. 

The  note  is  dated  January  4th,  payable  in  8  months.  January  is 
the  1st  month ;  1  and  8  are  9.  September  is  the  9th  month.  The  note 
is  due  September  4-7. 

The  note  is  dated  July  5,  and  payable  in  8  months.  July  is  the  7th 
month;  7  and  8  are  15.  March  is  the  15th  month.  The  note  is  due 
March  5-8. 

I  originated  the  idea  of  committing  to  memory  this  numbering  of 
the  months,  from  1  to  24,  many  years  ago,  at  a  time  when  I  was 
called  upon  to  file  away  an  immense  number  of  notes  in  a  day.  I  have 
never  had  occasion  till  now  to  reproduce  the  table  on  paper — it  then, 
by  practice,  became  so  fixed  in  my  mind.  At  that  time  I  handed,  on 
some  days,  a  thousand  promises  to  pay  to  the  Note  Teller  to  collect. 
The  skill  to  cast  time  correctly  on  this  plan,  when  once  thoroughly 
acquired,  seems  to  remain  long  after  practice  upon  it  has  ceased. 

DISCOUNT    TIME. 

A  note  written  payable  a  certain  number  of  days  from  date  must 
have  its  maturity  ascertained  by  taking  just  that  number  of  days  and 
the  three  days  of  grace,  without  any  regard  to  the  month.  Thus,  a 
note  of  90  days  from  November  10th  matures  in  93  days — on  February 
8th-llth. 

The  discount  time  is  a  question  of  custom.  The  New  York  custom 
is  to  reckon  the  days  to  maturity  on  everything.  In  most,  if  not  all, 
of  the  Boston  banks  the  actual  days  are  i-eckoned  when  the  note  is 


THE    DISCOUNT    CLKRK    AND   THE    LOAN.  133 

written  in  days,  and  months  and  days  are  reckoned  when  the  note  is 
written  in  months. 

DEPOSITORS'    RATES. 

The  banking  business  as  far  as  loaning  money  is  concerned  is  in  a 
muddle  in  some  localities  from  causes  wiiich  will  be  recognized  and 
fully  understood  by  most  experienced  bankers.  The  business  of  paying 
interest  upon  deposits  has  so  woven  itself  into  the  banking  system  that 
its  influence  must  now  be  taken  into  full  account  in  any  discussion  of 
banking.  Banks  are  so  generally  in  the  habit  of  paying  interest  upon 
all  deposit  accounts  which  are  of  respectable  size  that  depositors  of 
this  class  who  do  not  have  an  interest  contract  expect  compensation  for 
tlieu'  accounts  of  another  sort,  but  well  up  to  the  proportions  of  that 
received  by  the  accounts  upon  which  interest  is  paid.  This  compen- 
sation is  discount  accommodation  on  what  may  be  called  nominal 
terms — loans  of  money  whenever  they  are  in  want  on  rates  based  not 
on  the  market  rates  but  on  their  claims  as  depositors.  This  matter  has 
become  so  difficult  of  adjustment  and  so  demorahzing  in  its  influence 
upon  rates  for  loans  that  many  bankers  have  at  times  been  inclined  to 
favor  the  adoption  of  a  plan  which  would  do  away  entirely  with  all 
discount  obligations  to  depositors  by  paying  a  small  rate  of  interest 
upon  all  important  deposits  and  loaning  their  money  in  open  market 
at  the  best  rates  possible,  thus  doing  business  very  much  on  the  London 
joint-stock  bank  and  American  trust  company  principles. 
FORWARDED    PAPERS. 

At  least  once  in  six  months,  in  every  National  bank,  there  is  a  full 
examination  of  the  bank — of  all  its  departments,  assets,  etc.  When 
the  Directors  are  making  this  examination,  they  find,  on  reacliing  the 
Discount  Department,  that  much  of  the  discount  paper  belonging 
thereto  has  been  scattered  far  and  wide,  in  places  where  it  is  payable, 
and  where  it  has  been  sent  for  collection  on  account  of  its  nearing 
maturity,  and  that  all  they  have  before  them  is  a  record  of  the  paper 
in  the  shape  of  covers,  etc. 

It  is  a  most  excellent  and  well-nigh  indispensable  plan  for  the 
discount  officer  to  anticipate  and  prepare  for  tliis  state  of  tilings — this 
absence  of  his  vouchers — by  securing,  when  he  sends  away  foreign 
paper  that  is  to  be  absent  at  an  examination  period,  acknowledgments 
from  the  banks,  etc.,  to  which  it  has  been  sent,  stating,  in  full  detail, 
just  what  paper  they  have  received.  These  descriptive  letters  of 
acknowledgment  are  of  great  convenience  and  satisfaction  to  examiners. 
I  have  never  considered  it  a  very  good  plan  to  forward  foreign  collec- 
tions much  in  advance  of  their  maturity — not  farther  in  advance  than 
is  needful  in  order  to  get  them  to  the  points  where  they  are  payable  in 
ample  season  to  secure  their  due  notification,  and  also  to  secure  an 
acknowledgment  of  their  non-receipt,  in  case  of  accidents,  in  season  to 
send  duplicates  to  take  the  place  of  the  lost  or  miscarried  paper. 

Pcrhap'^  as  good  a  rule  as  any  is  to  send  forward  for  collection,  in 


134 


PRACTICAL    BANKING. 


the  middle  of  one  month,  all  the  paper  maturing  abroad  in  all  the  next 
month.  DEMAND    COLLATERAL   NOTES. 

The  foUowing  (see  form  29)  is  a  good  form  for  a  note  of  this  class: 


•  F^i  'M  U  U 


Form  29. 

It  is  a  copy  from  one  in  actual  use  in  one  of  our  largest  banks,  and 
■was  framed  with  the  greatest  care.     Notwithstanding  all  the  strength 


THE    DISCOUNT    CLERK    AND    THE    LO.VX.  135 

of  expression  which  has  been  framed  into  tliis  note,  and  into  the 
general  run  of  notes  of  this  style,  regarding  the  concession  of  aiithority 
to  the  payee — the  bank,  to  sell  without  notice  either  at  public  or 
private  sale,  or  otherwise,  all  the  collateral  pledged — it  is  still  a  question 
whether  a  bank  can,  under  existing  statutes  and  common  law,  proceed 
thus  summarily  and  unceremoniously  if  the  pledgor  protests  against 
such  peremptory  sale. 

From  very  high  authority,  however,  I  have  obtained  the  following 
concisely  expressed  opinion  : 

"  In  regard  to  sale  of  collateral  security,  '  without  notice,  either  at  public  or  pri- 
vate sale,'  as  per  agreement  signed  when  depositing  it, 

"It  is  competent  for  the  parties  to  agree  by  express  terms  that,  upon  the 
pledgor's  default  or  upon  his  refusal  to  keep  the  security  good,  the  pledgee  may  sell 
at  public  or  private  sale,  at  his  option,  without  giving  notice  to  the  pledgor  of  his 
intention,  or  of  the  time  or  place  of  sale. 

Milliken  r.s.  Dehon,  27  X.  Y.,  364  fcotton). 

Chouteau  rs.  Allen.  70  Mo.,  290  (bonds). 

Loomis  vs.  Stave,  72  111.,  623  (bonds). 

Md.  Fire  Ins.  Co.  vs.  Dalrymple,  25  Md.,  242  (B.  &  O.  bonds). 

Genet  vs.  Howland,  45  Barb.,  560  (Pac.  Mail  stock). 

Hamilton  vs.  State  Bank,  22  Iowa,  306  (U.  S.  bonds). 

Fitzgerald  us.  Blocher,  32  Ark.,  742  (Ark.  Treasury  certif)." 

RATES  FOR  LOANS. 
There  are  some  general  principles  governing  the  theory  and  practice 
of  bank  loaning  and  discounting  which  it  maybe  profitable  to  mention. 
In  loanmg  money  on  demand,  when  it  is  strictly  understood  between 
bank  and  borrower  that  the  money  so  advanced  is  positively  and  purely 
mmute  money — to  be  called  in  promptly  whenever  the  bank  needs  it 
and  to  be  paid  promptly  when  called — banks  are  accustomed  in  ordin- 
ary times  to  charge  low  rates  of  interest,  and  are  certainly  justified  in 
so  doing.  There  are,  of  course,  exceptions  to  this  practice.  Banks 
sometimes  loan  more  or  less  of  theh*  funds  on  nominal  call  to  dealers 
and  others  who  have  some  real  or  imaginary  claims  upon  them  for 
accommodation  of  this  description.  This  nominal  demand  money  is 
taken  by  the  borrower  with  the  mutual  understanding  that  it  shall  be 
repaid,  not  when  the  bank  may  need  it  and  be  inclined  to  call  for  it, 
but  when  the  borrower  no  longer  needs  it  and  finds  it  convenient  to 
pay  it  back,  no  matter  what  may  be  the  wants  or  A\'ishes  of  the  bank 
in  regard  to  it.  These  loans  are  a  great  convenience  and  accommoda- 
tion to  the  borrower  and  an  inconvenience  to  the  lender.  The  fewer 
loans  of  this  type  a  bank  has  outstanding  the  better  for  the  institution. 
But  somehow  or  other  most  banks  finds  themselves  obliged  to  cany 
along  more  or  less  of  this  unavailable  minute  money — the  minute 
characteristic  being  apparent  only  in  the  fact  that  the  borrower  can 
pay  it  any  minute  he  pleases  and  will  not  pay  it  one  minute  sooner 
than  is  convenient  for  him  so  to  do.  Any  experienced  banker  will 
concede  that  "demand"  loans  of  this  character  should  pay  the  highest 
rates  of  any  loans  made  by  the  banks,  and  all  bank  Managers  will, 
when  they  can,  charge  more  on  them  than  on  any  class  of  time-paper. 


13G  PRACTICAL    BAXKIXG. 

Again,  in  periods  of  great  stringency — of  panic — borrowers  who  have 

full  faith  that  the  close  times  Avill  be  of  short  duration  are  often  glad 

to  pay  very  high  rates  for  call  money  rather  than  indulge  in  the  luxui-y 

of  a  discount  at  the  current  high  rates,  because  in  this  way  they  hope 

to  tide  over  the  days  that  may  elapse  before  rates  on  time-paper  sink 

to  a  normal  basis.     During  such  periods  sagacious  bank  Managers  are 

willmg  to  stram  a  point — to  run  up  then*  loan  a  little  liigher  than  they 

othewise  would — in  order  to  take  on  long  paper  at  the  current  liigh 

rates — that  is,  they  aim  to  keep  out  as  little  call  money  as  safety  "vvill 

allow,  no  matter  how  high  it  may  bid,  and  discount  all  the  long  paper 

prudence  will  approve. 

BUYING   PAPER. 

Banks  discount  paper  for  their  depositors — and  simply  term  the 
operation  discounting.  But,  when  they  go  outside  of  their  line  of 
depositors,  in  making  investments  in  time  paper,  they  generally  term 
the  procedure  buying  paper.  Their  dealings  in  this  paper-buying 
business  are  generally  with  a  class  of  traders  termed  note  brokers, 
or  with  private  bankers  and  brokers. 

There  is  a  deal  of  talent  and  capital  in  this  business  of  buying  and 
selling  paper;  and,  in  our  large  cities,  it  is  conducted  with  a  skill  and 
to  an  extent  that  would  not  have  been  dreamed  of  thirty  or  forty  years 
ago,  when  note  brokers  were  few  in  numbers  and  small  in  their  volume 
of  business. 

Here  I  cluster  a  few  points  of  value  and  interest,  wliich  relate  to 
note  buying  by  the  banks,  and  note  selUng  by  the  dealers. 

The  heavy  firms  in  the  large  cities,  whose  profession  is  that  of 
dealing  in  time  paper,  generally  own  a  large  proportion  of  the  paper 
they  are  currently  offering  for  sale  to  the  banks  and  private  capitalists, 
havmg  bought  it  outright  of  promisors,  endorsers,  etc.,  who  have 
adopted  such  sale-metliods  as  a  means  of  raising  money. 

But  these  large  negotiators  are  also  generally  in  the  habit  of  doing 
quite  a  share  of  the  commission  paper  business. 

These  extensive  dealers  seldom  endorse  any  of  the  paper  which  they 
negotiate.  If  they  fell  into  the  business  of  freely  adding  their  names 
to  the  vast  mass  of  notes  and  acceptances  which  pass  through  their 
hands,  their  credit  would  soon  suffer  from  that  criticism  which  is  meted 
out  to  parties  who  have  the  reputation  of  being  very  much  extended. 

The  exception  to  this  rule  of  non-endorsing  sometimes  crops  out  in 
cases  where  they  pass  a  line  of  paper  into  the  loan  of  the  banks  where 
they  keep  their  own  special  accounts — banks  which  expect  to  give  them 
a  certain  amount  of  accommodation  on  account  of  the  presence  of  their 
handsome  balances,  and  which  are  not  apt  to  extend  a  discount  accom- 
modation of  that  nature  without  receiving  the  endorsements  of  their 
dealers  on  the  paper. 

Notes  bought  by  banks  of  note  dealers  without  their  endorsement 
.are  held  to  be  guaranteed  by  them  to  be  all  right,  in  all  points,  except 


THE    DISC0U2CT    CLERK    AND    THE    LOAN.  137 

that  wliich  covers  the  question  of  whether  tliey  will  be  paid  or  not. 
The  dealers  give  no  guarantee  of  this,  for  they  have  not  endorsed,  and 
the  bank  uses  its  best  judgment  and  discretion  and  takes  this  risk  itself. 

DEMAND  LOANS. 

National  banks,  particularly  those  having  large  capitals,  and  located 
in  Clearing-House  cities,  find  it  a  very  convenient  thing  to  put  out 
quite  a  percentage  of  their  loans  in  the  shape  of  money  on  strict 
call — minute  money.  In  some  cities,  notably  in  Boston,  banks  have  a 
habit  of  borrowing  of  each  other  at  Clearing-House  settlements  large 
amounts  of  call  money. 

This  business  of  the  banks  of  borrowing  demand  money  of  each 
other,  entirely  without  security,  has  many  objectionable  features,  some 
of  which  I  have  alluded  to  elsewhere. 

In  settlement  of  these  Clearing-House  loans  between  banks,  the 
interest  is  generally  made  up  and  charged  when  the  loans  are  fully 
paid,  for  loans  of  this  sort  do  not  often  stand  a  very  long  time. 

But  where  loans  of  this  class  stand  for  a  considerable  time,  the 
interest  upon  them  should  be  settled  as  often,  at  least,  as  once  a  month. 

The  interest  upon  the  regular  individual  call  loan  file  should 
certainly  all  be  made  up  and  collected  once  in  three  months. 

All  endorsed  demand  notes  held  by  a  bank  should  start  with  a 
waiver  of  demand  and  notice  by  the  endorser,  since  in  time  (in  some 
States  in  60  days)  endorsers  are  lost — unless  a  demand  for  payment  is 
made  upon  promisors — if  this  precaution  has  not  been  attended  to. 

THE    BROKER'S    RESPONSIBILITIES. 

There  have  been  so  many  lucid  and  unmistakable  legal  decisions 
upon  this  point  that  we  may  consider  it  well  and  thoroughly  covered. 

If  the  note  dealer,  in  selling  notes  to  banks,  makes  what  be  believes 
to  be  fair  and  honest  representations  regarding  the  standing  of  this, 
by  liim  unindorsed  paper,  which  he  is  marketing  simply  as  a  commission 
man — an  agent — and  makes  representations  and  statements  of  such  a 
straightforward  type  that  upon  them  no  charge  of  false  pretenses  can 
be  made  to  rest,  he  assumes  simply  and  only  this  responsibility — he 
guarantees  that  it  is  what  it  appears  to  be — a  real  promise  to  pay — 
genuine  in  every  point  in  date,  amount,  signature,  etc.,  and  that,  in 
selling  it,  he  conveys  a  good  title  to  the  paper.  But  bad  is  the  luck  of 
the  honest  sellers  to  honest  buyers  of  notes  and  acceptances  which  have 
in  and  about  them  any  fraud,  for  the  sellers  under  such  circumstances 
must  make  good  all  losses  that  may  thereby  come  to  last  holders. 

There  is,  however,  one  point  relative  to  these  transactions,  and  just 
without  the  question  of  legal  liability,  which  should  not  be  overlooked. 
Although,  as  I  have  said,  the  dealers  seldom  endorse  any  of  the  cloud  of 
notes  and  acceptances  which  they  buy  and  sell,  or  negotiate  for  owners 
or  makers,  they  make  these  operations  with  a  sense  of  responsibility 
which,  intangible  as  it  often  is,  is  nevertheless  recognized  among  them 


138  PRACTICAL   BAXKIXG. 

— especially  among  those  whose  standing  and  business  are  of  the  first 
class — as  binding  with  something  of  the  force  of  their  guarantee.  This 
responsibiUty  is  that  wliich  makes  them,  exceedingly  anxious  that  the 
paper  they  sell  shall  be  paid,  and  that  it  shall  prove  to  be,  in  all  points, 
precisely  as  they  have  represented  it  to  be. 

A  reputation  for  selling  only  that  which  is  good  paper  is  what  all 
reputable  note  dealers  are  striving  to  obtain  for  themselves. 

They  may  pass  into  the  loans  of  banks  and  the  portfolios  of  private 
investors  poor  paper  in  which  they  have  had  confidence,  and  which 
they  have,  in  good  faith,  represented  to  be  strong ;  but  they  are  exceed- 
ingly anxious  not  to  do  this  sort  of  business. 

There  is  extant  among  some  note-brokers  so  much  of  what  we  may 
term  an  honorable  pride  of  trade,  a  pride  in  handling  only  first-class 
paper,  that  no  temptation,  in  the  way  of  rates  or  commissions,  wUl 
induce  them  knowingly  to  have  anything  to  do  with  any  other  sort. 

TAKE    A   BILL    OF    SALE. 

It  is  an  excellent  plan  for  a  bank,  in  buying  paper  of  dealers  and 
others  who  do  not  endorse  the-  paper  they  negotiate,  to  take  a  bUl  of 
sale  of  the  same,  and  it  should  be  carefully  preserved  and  filed  away 
like  other  papers  of  importance. 

While  the  note-broker  who  sells  paper  to  a  bank  does  not,  as  I 
have  said,  guarantee  that  the  paper  shall  be  paid  at  maturity,  he  does, 
by  handling  it,  guarantee  that  it  is  just  what  it  purports  to  be,  an 
honest  and  legitimate  promise  to  pay;  and  right  here  is  where  the  value 
of  the  bill  of  sale  comes  in.  It  is  a  record,  in  black  and  white,  which 
always  shows  at  once  to  the  purchaser  where  the  paper  he  holds  has 
come  from. 

The  seller  of  paper  is,  of  course,  held  as  fully  in  the  points  we  have 
described  without  the  passing  of  a  bill  of  sale. 

But  it  might,  under  some  circumstances,  be  difficult  to  recall  and 
prove  the  seller's  connection  with  the  paper  if  there  was  no  bill  of 
sale  accompanying  its  conveyance. 

BUSINESS   AND    ACCOMMODATION    PAPER. 

These  are  terms  often  heard  in  banks. 

Notes  and  acceptances  that  are  made  in  settlement  of  genuine  busi- 
ness transactions — given  in  payment  for  property  purchased — come 
under  the  head  of  regular  and  legitimate  business  paper.  Paper  of 
this  sort  was  far  more  abundant  in  the  loans  of  our  banks  thirty  or 
forty  years  ago  than  it  is  at  present — or,  at  any  rate,  the  proportion 
of  paper  of  this  sort  then  discounted  by  them  Was  far  in  excess  of  what 
it  is  to-day,  and  for  the  simple  reason  that  nowadays  such  notes  are 
made  for  only  a  small  proportion  of  the  volume  of  the  business 
transacted. 

I  remember  well  when  it  was  the  custom  among  the  dry  goods 
commission  houses  to  sell  domestics  to  shipping  houses,  for  exportation 


THE   DISCOUNT    CLERK   AND   THE   LOAN.  139 

to  India,  China,  Africa,  etc.,  on  credit  of  from  twelve  to  fourteen 
months;  and  I  liave  handled  luueli  paper  of  tliis  sort. 

Another  class  of  old  time  business  paper,  who.se  face  was  at  one 
time  very  familiar  to  me,  also  is  no  longer  to  be  met  with.  I  refer  to 
paper  given  on  long  dates  for  all  sorts  of  merchandise — a  list  ranging 
from  Waterbury  brass  trinkets  to  rum,  bought  of  the  manufacturers 
for  sliipment  by  slow-moving  sailing  ships  to  the  west  coast  of  Africa, 
and  other  remote  and  uncivilized  portions  of  the  world. 

All  the  methods  of  these  branches  of  commerce  have  been  changed 
since  the  introduction  of  steam,  ocean  cables,  etc. ;  and  one  sees  in 
these  days  little  of  this  old-fashioned  paper  in  the  loans  of  banks,  or 
anywhere  else. 

But  the  most  marked  falling  off  in  the  bank  loan  supply  of  this 
desirable,  old-time  class,  of  legitimate  business  paper  has  been  brought 
about  by  other  changes  in  the  mode  of  transacting  business. 

Thu-ty  or  forty  years  ago,  commercial  travelers —drummers — were 
hardly  known.  The  country  merchants  made  periodical  visits  to  the 
cities — to  the  great  trade  centres— arid  made  their  oAvai  selections  and 
purchases  of  goods.  Each  interior  trader  generally  had  one  house  in 
each  line  of  his  trade,  on  which  he  was  dependent  for  his  supply  of 
merchandise,  and  from  that  house  he  made  about  all  his  purchases. 
The  result  was  his  transactions  were  often  of  quite  an  extensive 
character  with  his  city  dealer,  and  with  this  dealer  he  had  credit,  and 
gave  him,  in  settlement  of  purchases,  promises  to  pay,  drawn  upon 
varying  times,  arranging  maturities  in  a  manner  agreed  upon  by  buyer 
and  seller. 

The  discount  applications  at  the  banks  w-ere,  in  those  days,  made 
up,  to  quite  an  extent,  of  business  paper  of  this  particular  class.  I 
have  handled  a  good  deal  of  it  in  acting  as  an  ofla.cer  of  a  bank  which 
had  among  its  dealers  many  grocers  and  jobbers. 

Nowadays  the  country  is  scoured  by  commercial  travelers,  who  cut 
the  trade,  which  once  was  conducted  in  the  manner  I  have  described, 
into  very  small  lots,  and  do  the  business  on  a  cash,  or  cash  in  30  days  or 
so,  basis — a  basis  which  rests  almost  entirely  upon  open  book  accounts, 
and  makes  no  negotiable  bushiess  paper. 

Previous  to  the  period  of  wdiich  I  have  been  writing,  a  deal  of 
bartering  was  in  vogue — particularly  in  the  wholesale  grocery  trade. 

Produce  commission  merchants  who,  in  person  or  by  agents,  now 
cover  the  country,  soliciting  consignments,  and  making  advances  and 
purchases,  were  then  hardly  known. 

The  country  traders  took,  in  trade,  all  sorts  of  country  produce; 
and  their  city  grocers  received  the  same  from  them  in  exchange  for 
West  India  goods  and  groceries,  and  the  balances  were  settled  by 
making  tune-notes. 

I  note  here,  as  an  interesting  fact,  that,  since  1850,  the  great  refiners 
and  dealers  in  sugar,  who  scatter,  in  comparatively  moderate  sized  lots> 


140  PRACTICAL   BANKING. 

their  immense  products  of  refined  sugar,  syrups,  etc. ,  have  not  been  in 
the  habit  of  receiving  fi'om  the  wholesale  grocers,  etc.,  who  buy  this 
sugar,  any  notes  whatever.  The  sugai's  are  all  sold  for  cash  in  30  days, 
on  book  account,  and  the  syrups  for  cash  in  60  days,  also  on  book 
account. 

In  the  days  when  long  hsts  of  small  business  notes  were  constantly 
passing  into  bank  loans,  the  work  of  Discount  Clerks  was,  in  many 
points,  more  arduous  than  at  present. 

ACCOMMODATION    PAPER. 

Promises  to  pay,  which  are  thus  named,  are  of  a  character  which  is 
precisely  indicated  by  their  title.  In  general  terms,  an  accommodation 
note,  or  acceptance,  is  one  which  is  signed,  endorsed,  or  accepted  by 
-an  accommodating  party  for  the  accommodation  of  some  other  person, 
who  is  also  a  party  to  the  note,  either  in  the  way  of  signer,  endorser, 
or  acceptor.  But,  in  whatever  way  the  accommodator  may,  by  name, 
appear  on  the  paper,  it  is  not  understood  or  expected  that  he  will  have 
to  attend  to  its  payment  or  renewal  at  matui-ity,  while  the  accommo- 
dated is,  at  the  time  of  the  execution  of  the  paper,  given  distinctly  to 
understand  that  he  must  attend  to  its  settlement,  whether  his  name 
may  appear  first  or  last  upon  it. 

The  name  of  the  paper  in  question  has  a  bad  flavor  among  banks, 
"bankers  and  other  note  buyers. 

As  a  class,  accommodation  paper  has  a  hard  reputation — and 
deservedly  so.  It  is  not  what  it  pretends  to  be.  It  is  not  issued  and 
based  upon  mercantile  transactions.  There  is  no  ''value  received"  in 
and  about  it — no  merchandise — no  material  value  beneath  it.  It  has 
a  pretence  of  being  paper  of  more  than  one  name,  when  it  really  has  a 
most  decided  single-name  aspect. 

For  these  reasons  its  presence  in  the  loans  of  banks  is  watched  with 
jealous  eye  by  bank  examiners,  and  its  close  acquaintance  generally 
shunned  by  our  shrewdest  note-buyers. 

Any  man  who  lends  his  name  to  a  piece  of  paper  is,  of  course,  held 
for  its  payment,  no  matter  what  may  be  his  intentions  at  the  outset, 
or  his  private  understandings  with  the  accommodated  party  for  whom 
the  paper  has  been  made. 

It  follows  that  there  are  all  grades  and  shades  of  accommodation 
paper,  and  there  is  plenty  of  this  kind  of  paper  afloat  with  names  upon 
it  so  strong  that  no  one  can  question  its  soUdity,  though  it  represents 
no  actual  business  transaction  between  the  parties  to  it,  and  rests  upon 
no  other  foundation  than  that  of  mutual  agreement  to  pay  without  any 
apparent  value  received. 

In  the  loans  of  the  National  banks  of  the  period,  in  city  as  well  as 
in  country,  there  is,  at  the  present  time,  a  vast  quantity  of  paper  that 
is  really  nothing  but  the  accommodation  paper  of  factories,  commission 
mercliants  and  other  makers,  but  which  is  about  as  good  as  gold. 

The  objectionable— dangerous — class  of  accommodation  paper  is  of 


THE   DISCOUNT    CLERK   AND    THE    LOAN.  141 

a  type  which  we  need  not  further  describe,  and  careful  bank  managers 
will  not  buy  it  if  they  know  it. 

"MANUFACTURING"  BUSINESS  PAPER. 
He  was  a  heavy  manufacturer  and  shipper  of  lumber  in  a  city  in 
Maine,  sending  his  product  wherever  there  was  a  liarbor  in  Massa- 
chusetts, Rhode  Island,  etc.  He  was  a  bank  Director  in  the  city  where 
he  carried  on  liis  business,  and  his  habit  was  to  draw  through  this 
bank  for  his  lumber  shipments,  at  three  and  four  months'  time,  on  his 
consignees  here  and  there,  and  have  the  paper  for  the  most  part  at 
once  discounted  at  this  bank.  The  paper  was  always  made  payable 
at  tlie  Boston  bank  where  the  Maine  bank  did  its  business,  and  tliis 
Boston  bank  received  all  the  paper,  procured  its  acceptance,  and  held 
it  for  collection.  So  the  business  went  on  year  after  year,  large  in 
volume  and  promptly  transacted.  By  and  by  the  lumber  dealer  lost 
his  money,  and  very  nearly  ran  out  as  far  as  his  original  and  legitimate 
business  was  concerned.  But  the  Maine  bank  seemed  to  be  rather 
oblivious  of  these  facts,  for  it  kept  on  allowing  him  a  heavy  line  of 
accommodation  on  discounts  of  what  appeared  to  be  legithnate  lumber 
acceptances — drafts  whose  acceptance  appeared  to  have  been  obtained 
by  himself  and  bearing  accepting  names  which  sounded  quite  famihar 
to  banking  men  who  had  long  been  dealhig  in  lumber  paper.  The 
paper  was,  as  iisual,  all  made  payable  at  the  corresponding  bank  in 
Boston.  This  paper  was  fraudulent  in  all  points.  It  was  made  up 
entirely,  acceptances  and  all,  by  the  party  for  whom  it  was  discounted. 
The  di'awees — the  acceptors— had  no  existence,  yet  their  names  as  they 
appeared  on  the  paper  so  nearly  resembled  the  names  of  existing, 
strong,  old-time  consignees  of  the  drawer  that  the  bank  had  no 
suspicion  of  the  deception  which  was  being  practised  upon  it.  In 
making  up  this  fraudulent  paper  the  drawer  had  hedged  against  any 
charge  of  forgery  by  carefully  avoiding  the  use,  as  his  imaginary 
acceptors,  of  the  names  of  any  existing  houses.  He  carried  along  this 
swindling,  kitmg  business  for  a  long  period  by  payuig  all  the  paper, 
generally  a  little  while  before  its  maturity,  through  the  bank  where  it 
was  made  payable  in  Boston.  And  the  discovery  of  his  irregularity 
was  not  made  until  he  had  become  so  deeply  involved  that  he  could  no 
longer  float  even  on  paper  so  easily  made  and  so  readily  negotiated, 
and  when  he  could  no  longer  meet  this  paper  he  ran  away. 

PAPER  WITH  MANY  NAMES. 
The  comparative  value  of  single-named  paper  and  paper  bearing 
two  or  more  names — the  class  generally  known  as  double-name  paper 
— is  now  being  quite  widely  discussed  by  bankers.  In  some  quarters  it 
is  urged  that  banks  and  trust  companies  should  not  make  a  practice  of 
introducing  into  their  loans  paper  of  the  single-name  class,  while  from 
other  directions  we  hear  arguments  against  any  statutes  or  by-laws 
limiting  the  loans  of  banks  to  notes  and  acceptances  bearing  at  least 


142  PRACTICAL    BAXKIXQ. 

two  names.  The  charters  of  our  trust  companies,  which  emanate  from 
the  State,  are  quite  rigid  in  this  matter  of  requiring  many  names  on  all 
paper  discounted  by  them.  Individual  paper  entering  into  these  trust 
company  loans,  according  to  the  State  laws  governing  most  trust 
companies,  must  bear  at  least  three  names.  Savings  banks  are  generally 
bound  by  this  same  restriction.  Thei-e  is  nothing  in  the  National  Bank 
Act  of  this  restrictive  character,  but  very  many  of  the  National  banks 
make  it  a  nile  never  to  loan  on  single-name  paper. 

There  are  some  absurd,  as  well  as  demoralizing  features  connected 
with  tills  matter  of  restriction  in  regard  to  the  number  of  names 
required  on  paper  entermg  into  the  loans  of  our  National  banks, 
sa^^ngs  banks  and  trust  companies.  These  institutions  are,  at  times, 
glad  enough  to  buy  at  paying  rates  strong  paper  bearing  one  gootl  name 
m  which  they  have  full  faith,  and  one  or  two  other  names,  as  the  case 
may  demand,  of  what  may  be  termed  a  straw-like,  or  made-to-order, 
character.  This  business  of  affixing  to  good  single-name  paper  names 
of  straw  to  meet  the  double-name  demands  I  have  described  often 
takes  on  quite  a  ludicrous  aspect.  Very  young  men  in  counting-rooms, 
junior  clerks  and  the  men  who  "take  down  the  shutters,"  are  found 
endorsing  millions  of  doUai's'  worth  of  paper  which  is  passmg  into  loans 
of  banks  and  trust  companies  tlirough  the  hands  of  brokers  and  others 
simply  for  the  reason  that  the  law  demands  the  two  or  more  names. 
Attempts  have  been  made  by  Savings  Bank  Commissioners  and  United 
States  Bank  Examiners  to  institute  reforms  in  this  business,  and  to  put 
a  stop  to  the  use  of  valueless  and  practically  fictitious  names  in  making 
acceptable  paper  for  bankers'  loans,  but  they  have  not  been  successful. 

I  have  here  given  a  description  of  a  bad  drift  in  paper  and  it  is 
easier  to  give  a  diagnosis  of  this  case  than  to  point  out  any  positive 
remedy.  But  suggestions  of  a  corrective  and  a  remedial  character 
readily  come  to  mind.  Paper  bearing  these  made-to-order  endorse- 
ments is  often  easily  recognizable  by  Bank  Examiners,  Commissioners, 
or  experienced  bankers.  When  it  crops  out  in  loans  of  banks  and  trust 
companies  to  an  objectionable  extent  the  Examiners  should  make  a 
note  of  it  and  send  reports  of  the  bank's  habits  in  this  regard  to  the 
proper  quarters.  They  should  also  take  occasion  to  suggest  to  the 
managers  of  the  banks  which  are  thus  being  loaded  with  objectionable 
paper  that  good  banking  demands  a  reform. 

Any  educated  banker  will  hesitate  to  recommend  that  all  restrictive 
provisions  in  laws  and  by-laws  in  this  matter  of  single  and  double  paper 
shall  be  removed.  Yet,  as  things  are  now  drifting,  it  would  seem  as  if 
their  existence  was  taking  on  a  farcical  character.  The  character  of 
our  bank  loans  will  always  be  governed  by  the  character  of  the  men 
who  manage  our  banks.  If  injudicious  and  unreliable  men  are  in 
charge  of  the  bank  loans  no  rules  regarding  the  number  of  names 
"which  shall  be  on  the  paper  they  take  will  be  of  much  account. 

In  the  best  managed   banks,  which  may  be  moving  along  under 


THE    DISCOUNT    CLERK    AND    THE    LOAX.  143 

double-name  rules,  there  Avill  come  occasions  when  it  will  be  perfectly 
justifiable  to  take  on  paper  bearing  one  solid  name  and  another  about 
which  no  questions  need  be  made;  yet  such  precedents  should  be 
followed  with  extreme  care.  Such  action  should  be  the  exception  and 
not  a  common  practice. 

LONG  AND   SHORT  PAPER. 

I  have  elsewhere  remarked  that  when  rates  are  high,  with  a  prospect 
of  declining  at  an  early  date,  sagacious  bank  managers  are  inclined  to 
select  from  the  paper  offered  them  for  discount  those  promises  to  pay 
which  are  of  long  dates.  This  general  rule  is  reversed  when  the 
situation  is  reversed.  When  discount-seeking  paper  bids  low  interest, 
and  bank  managers  believe  that  early  improvement  in  time  rates  is  in 
prospect,  they  prefer  to  put  out  their  money  on  call,  or  on  the  shortest 
time,  so  that  they  shall  soon  again  have  it  in  hand  to  sell  at  the  liigher 
prices  which  they  are  confidently  looking  for. 

Tliere  are  also  other  courses  of  reasoning  that  influence  the  action 
of  banks  in  their  selection  of  dates  for  their  loans.  They  must  aim  to 
scatter  and  locate  their  maturities,  and  place  them,  so  that  as  the  seasons 
roll  around,  the  bank  will  be  in  a  position  to  meet  the  reasonable 
demands  of  its  customers,  and  avail  itself  of  the  advantages  which 
must  come  from  being  in  funds  at  those  seasons  when  special  influences 
are  sure  to  create  large  and  profitable  public  demands  for  money. 

The  experienced  banker  knows,  for  instance,  that  at  certain  periods 
he  may,  if  well  intrenched,  reap  a  harvest  out  of  the  calls  for  loans 
which  are  sure  to  come  from  the  movers  of  various  crops.  At  one 
period  the  cotton  buyers  will  be  using  vast  sums  of  money,  at  another 
the  wool  men,  at  another  the  corn  or  the  wheat  or  the  hog  handlers 
will  be  clamoring  for  loans.     And  so  I  might  go  on. 

He  is  a  sagacious  and  successful  banker  who,  fi"om  observation  and 
large  experience,  is  able  to  discern  the  signs  of  the  times  in  the  transac- 
tions I  have  described,  and  shows  the  most  skill  in  navigating  his  loans 
with  a  view  to  making  the  most  of  the  influences  and  the  elements. 

CROP    AND   TRADE    INFLUENCES. 

Here  are  illustrations  of  the  way  crop  and  trade  influences  work 
upon  the  loan  market  and  control  the  action  of  banks  in  the  matter  of 
regulating  the  rates  and  dates  of  the  paper  they  pass  into  their  dis- 
count flies. 

In  the  centres  of  the  cotton  manufacturing  interests  of  the  North — 
or  rather  in  the  financial  centres  of  this  industry— the  banks  may,  in 
ordinary  times  and  under  ordinary  circumstances,  count  upon  a  large 
demand  for  discount  accommodations  from  the  representatives  of  the 
cotton  mills  between  the  middle  of  October  and  the  middle  of  January. 
In  this  period  the  bulk  of  the  cotton  crop  is  thrown  upon  the  market ; 
and  in  this  season  of  the  incoming  of  the  great  cotton  tide  the  bulk  of 
the  purchases  to  supply  the  mills  of  the  North  are  made.     It  is  a  time- 


144  PRACTICAL   BASTKING. 

honored  saying  among  cotton  consumers  that  a  purchase  before  the 
hoUdays  is  always  a  good  purchase.  In  carefully  managed  b.'uiks  in 
cotton  consuming  districts  resources  are  often  husbanded  to  meet  the 
wants  of  good  customers  who  will  press  upon  them  in  cotton  buymg 
months.  As  for  the  cotton  growers  themselves,  it  is  a  generally 
received  idea  that  they  are  always  in  want  of  money  and  always 
receiving  advances  upon  the  coming  crop. 

Among  the  wool  men — those  who  operate  and  deal  in  wool — there 
is,  generally  speaking,  an  active  demand  for  money  in  the  months  of 
the  wool  clip — months  which  range  with  the  latitude  from  April  to 
June.  Wool  consumers  buy  at  all  seasons,  since  there  are  few  reasons, 
other  than  the  state  of  the  markets  and  the  state  of  their  finances,  to 
lead  them  to  buy  at  one  season  more  than  another. 

The  wheat  crop  and  the  corn  crop,  ^'iewed  either  from  the  stand- 
point of  the  producer  or  the  dealer,  are  Autumn  consumers  of  money. 
The  same  may  be  said  of  crops  in  general,  with  the  exception  of  the 
examples  we  have  already  given. 

In  some  States  there  is  an  immense  amount  of  money  m  tan  pits. 
No  reflection  is  intended  upon  one  of  the  most  solid  and  enterprising 
interests  existmg  among  us  Avhen  I  quote  the  quaint  financial  remark 
of  a  man  of  wide  financial  experience  who  was  asked :  ' '  At  what  time 
in  the  year  do  the  tanners  generally  borrow  ? "  His  answer  was :  ' '  Every 
day  in  the  year. " 

It  should  here  be  noted  that  mid-summer  and  mid-winter  are  in  the 
North  apt  to  be  periods  of  comparative  stagnation  in  the  money  market. 

A    SAFEGUARD. 

Before  I  leave  this  matter  of  paper  let  me  mention  a  plan  of  action 
that  i^erhaps  might  with  advantage  be  adopted  by  the  banks — or,  at 
least,  by  those  banks  which  are  located,  as  it  were,  in  families  in  the 
cities  and  large  towns. 

Let  the  banks  in  any  given  place  unite  in  making  some  arrangement 
whereby  they  shall  be  enabled  to  know  at  any  time  the  amounts  of 
paper  of  any  name,  about  which  they  may  wish  to  be  thus  informed, 
which  is  being  held  in  the  loans  of  each  and  all  of  these  banks.  Let  the 
banks,  for  their  mutual  protection,  ''show  their  hand"  in  the  matter 
in  question. 

There  have  been  no  end  of  instances  where  bank  losses  from  bad 
paper  might  have  been  averted  had  the  banks  possessed  the  means  of 
knowledge  which  1  am  here  recommending. 

There  have  been,  within  recent  dates,  large  and  most  disastrous 
failures,  which  have  revealed  to  banking  circles  for  the  first  time  the 
existence  of  an  extent  of  liabilities  on  the  part  of  the  bankrupts  of  a 
magnitude  utterly  beyond  what  the  banks,  who  had  been  steadily 
loaning  them  up  to  the  very  day  of  their  collapse,  had  ever  dreamed 
of.  And  had  they,  by  the  use  of  the  method  I  have  suggested,  been 
earlier  informed  of  the  way  the  failed  houses  were  hedging  and  kiting 


THE    DISCOUNT    CLERK   AND   THE    LOAN.  145 

under  immense  issues  of  their  names  to  the  loans  of  the  various  banks, 
they  might  have  saved  tlieiuselves  from  heavy  losses  and,  at  tiie  same 
time,  helped  other  suffering  creditors. 

The  groat  difficulty  that  stands  in  the  way  of  doing  something  of 
the  kind  is  that  evident  lack  of  esprit  de  corps — community  of  spirit — 
which  is  apt  to  characterize  a  eomnmnity  of  banks.  There  are  no 
reasons  why  this  state  of  things  should  exist. 

Banks  ought  to  be  willing  to  work  together  for  their  mutual 
advantage  in  such  premises  as  those  I  have  named. 

DISCOUNTING   WHEN    A   BANK'S    RESERVE    IS    NOT    UP. 

I  elsewhere  clearly  explain  the  reserve  requirements  of  the  National 
Bank  Act.  As  I  have  there  stated  a  certain  portion  of  the  reserve 
may  be  kept  on  deposit  with  a  bank  in  one  of  the  large  cities,  while 
at  least  another  certain  proportion  must  be  in  lawful  money  in  the 
hands  of  the  bank  itself. 

It  will  be  observed  that  the  balance  with  the  reserve  agent— let  us 
say  in  New  York — no  matter  how  large  it  may  be.  can  only  count  as 
reserve  to  a  certain  specified  extent  on  the  whole  amount  of  reserve 
required  by  the  law. 

It  will  also  be  observed  that  only  lawful  money  can  be  counted 
as  the  home  reserve.  A  bank  may  be  carrying  along  a  large  quantity 
of  National  bank  bills  and  a  balance  in  New  York  largely  in  excess  of 
the  per  centage  which  the  law  permits  as  a  reserve  there  and  still,  by 
reason  of  its  small  holding  of  legal-tenders,  not  be  up  in  its  reservein 
accordance  with  the  demands  of  the  law.  In  such  a  situation  there 
are  banks  which  will  go  on  discounting  and  making  loans  in  the  face 
of  the  law  which  says  loans  must  not  be  made  when  the  reserve  is  not 
up,  by  paying  out  for  such  loans  either  National  bank  bills  or  New 
York  funds,  claiming  they  have  a  right  to  do  so  on  the  ground  that 
they  are  not  encroaching  on  their  reserves.  This  course  is  not  a  proper 
one.  The  Bank  Act  says  distinctly  that  loans  shall  not  be  made  when 
the  reserve  is  under,  and  the  bank  has  then  no  right  to  use  any  of  its 
assets  in  making  loans,  no  matter  what  the  character  of  those  assets 
happen  to  be. 

THE  TEN  PER  CENT.  LIMITATION. 
The  ten. per  cent,  limitation  of  the  Bank  Act  has  an  application 
wliich  is  sometimes  overlooked  by  bank  managers.  National  banks 
are  prohibited  from  loaning  over  ten  per  cent,  of  their  capital  to  any 
one  individual  or  corporation^  except  upon  paper  representing  actually 
existing  merchandise.  This  ten  per  cent,  pro^'ision,  therefore,  must 
apply  to  loans  made  by  any  National  bank  to  any  other  bank,  National, 
State,  or  private. 

NATIONAL   BANKS    AND    LOANS    ON    REAL    ESTATE. 
A  National  bank  can  take  a  mortgage  upon  real  estate  as  security 
for  debts  due,  or  enter  into  full  possession  of  the  same  class  of  property 


146  PRACTICAL  BAXKIXG. 

in  the  discharge  of  debts,  yet  it  cannot  make  advances  upon  pledge  of 
real  estate  and  buy  and  sell  this  class  of  property.  Where  it  has,  by 
force  of  debt  circuuistanees,  become  the  owner  of  real  estate  mortgages 
or  of  real  estate  the  Banking  Department  at  Washington  takes  the 
ground  that  it  must  reheve  itself  of  such  holdings  as  early  as  practicable. 
Bankers  and  business  men,  mainly  of  the  South  and  West,  have 
from  the  beginning  of  the  National  bank  system  been  urging  the 
necessity  of  such  a  modification  of  the  National  Bank  Act  as  shall 
permit  National  banks  to  enter  regularly  and  systeuiatically  into  the 
business  of  making  loans  upon  real  estate,  but  though  there  is  much 
that  may  be  urged  in  regard  to  this  proposed  amendment  it  has  never 
been  received  with  favor  by  the  majority  of  our  best  practical  and 
theoretical  financiers.  They  hold  that  advances  upon  real  estate,  as 
far  as  banks  are  concerned,  should  be  left  to  savings  banks,  which  are 
pecuUarly  competent  to  make  what  may  be  termed  perpetual  uncol- 
lectible loans  upon  solid  security,  while  banks  of  the  other  class  are 
from  the  nature  of  their  deposits  best  adapted  for  the  negotiation  and 
management  of  easily  collectible  loans  of  short  dates.  There  is  no 
immediate  prospect  of  any  modification  of  the  Bank  Act  in  this  respect, 
and  it  is  well  that  such  is  the  case. 


THE    bank's    COLLATERAIiS. 


147 


l,£fUd.^:n.£^ 


Demand. 

Date.  <^^2^ ^.J§9  o. 

Collaterals:- 


CHAPTER  VIII. 

THE    BANK'S   COLLATERALS. 

One  cannot  with  difficulty  over-estimate  the  uuportance  of  this  topic. 

The  stock,  bond  and  various  other  classes  of  paper  securities  which 

are  held  by  our  banks  as  collateral  security  are  usually  put  in  the 

charge  of  the  Cashier  or  Discount  Clerk  and  kept  in  the  safest  place 

the  bank  has  at  command.  These 
securities  are  not  the  bank's  prop- 
erty and  their  pledgors  are  one 
and  another  borrowing  dealers, 
who  have  been  in  the  habit  of 
taking  good  care  of  them,  and  who 
wish  the  bank  to  do  the  same. 
They  should  be  neatly  packed 
away,  and  care  should  be  taken 
not  to  have  them  torn  or  dis- 
figured. Boxes  of  tin,  or  some- 
thing of  the  sort,  should  be  used 
by  the  bank  for  the  storage  of 
the  shares  and  bonds  in  the  vaults. 
The  officer  in  charge  should 
have  them  very  neatly  and  sys- 
tematically arranged  and  in  such 
shape  and  with  such  accompany- 
ing descriptions  that  they  may  at 
all  times  be  in  readiness  for  easy 
and  correct  examination  at  short 
notice  by  Directors  or  Bank 
Examiners,  and  easily  handled 
for  exchange  or  for  final  dehvery 
to  the  pledgors.  The  condition 
of  the  collaterals  in  these  points 
of  arrangement  and  tidiness  is  a 
gauge  of  the  character  of  the 
general  management  of  the  officer 
in  other  points  of  his  administra- 

' Form  30. '  tio^.     Form  30  on  this  page  is  a 

descriptive  cover  for  use  in  the  flOLing  we  have  just  specified  above. 
These  covers,  or  labels,  are  made  from  good  stiff  pasteboard,  and  are 


c^ -9pf  <::t'*^<Ji' 

'7^f 

qJ  »t*—      . 

y^ 

qT^^ 

7f' 

148  PRACTICAL    BAXKIX&. 

intended  to  be  strapped  upon  the  collateral  they  describe  with  straps  of 
rubber  or  leather. 

If  the  securities  are  held  by  the  Cashier,  and  the  secured  notes  by 
tiie  Discount  Clerk,  the  Cashier  should  place  on  the  notes  some  mark 
of  his  possession  of  the  collateral  as  a  satisfaction  to  the  bank  and 
Discount  Clerk.  In  the  progress  of  a  collateral  note  towards  payment 
many  changes  of  collateral  are  quite  likely  to  take  place,  but  no 
Cashier  or  other  officer  should  give  up  to  the  dealer,  either  in  the 
way  of  exchange  or  at  time  of  payment,  collateral  seciu*ity  held  with 
notes  without  taking  a  receipt  for  the  same.  Misunderstandings, 
litigation  and  losses,  have  entered  banks  througli  bad  systems  of 
handling  collateral. 

It  is  by  far  the  better  course  to  rigidly  carry  out  the  plan  of  using  a 
receipt  or  memorandum  of  this  sort  (See  Forms  31  and  32)  for  all  such 
changes  and  deliveries. 


Memorandum  of  Chang-e  of  Collaterals. 


Received....-9i,6'(90  boncl  Dorchester  R.  R.  Co 

Sub3tituted....m^  check,  $1^000 

Arthur  Duncan  &  Co 

New  YoTX—August  11, 1890 by  Paul  Graham 


Form  31. 


Memorandum  of  Chang-e  of  Col 

Received... .i6»0  shares  Somerset  R.  R. 

laterals. 

Co 

Substituted....  iOO  shares  Worcester  R. 

R.  Co. 

son  &  Son 

H.  Robin 

Philadelphia,...  ^^<r/^/S^ 

15^  1890. 

Form  32. 

The  question  is  very  often  raised  whether  or  not  banks  and  bankers 


THE    bank's    collaterals. 


149 


examine  coupon  bonds  which  they  are  currently  talking  in  such  vast 
quantities  to  see  if  all  the  right  coupons  are  attached  when  the  bonds 
are  taken  on  as  collateral.  Such  examinations  are  very  infrequently 
made.  Neither  is  the  borrower  in  the  habit  of  looking  into  the 
coupon  portion  of  his  collateral  when  he  receives  tlie  bonds  back 
from  responsible  holders  after  paying  the  notes  secured  by  them. 
Once  in  a  while  there  is  trouble,  and  it  is  found  that  bonds  which  have 
been  doing  a  large  business  in  a  collateral  capacity  have  somehow  lost 
coupons — losses  which  are  exceedingly  embarrassing  since  it  becomes 
extremely  difRcult  to  locate  the  deficiency. 

If  coupons  mature  while  the  bonds  are  being  held  as  collateral,  a 
receipt  should  always  be  taken  to  show  their  delivery  to  the  owner  of 
the  bonds  ;  and,  similarly,  dividend  orders  upon  stock  collateral  should 
either  be  so  dra^vn  as  to  require  the  owner's  endorsement  or  should  be 
covered  by  a  receipt. 

If  a  bank  takes  on  as  collateral  time  paper,  it  should  have  some 
perfect  system  by  which  it  may  certainly  avoid  the  disagreeable  results 
of  letting  such  paper  run  by  its  maturity  unpresented  and  thus  losing 
endorsers. 

Placing  dummy  covers  in  the  collection  files,  or  discount  files,  and 
other  plans  will  readily  suggest  themselves  to  bank  officers  as  a  preventive 
of  the  trouble  named. 

It  is  often  important  for  a  manager  to  be  able  to  know  at  a  glance 
just  what  lines  of  shares  and  bonds  he  is  loaning  upon,  for  wavering 
markets  may  make  him  anxious  about  margins.  For  this  reason  a 
book,  showing  these  facts  easily  and  quickly,  should  be  kept.  Here 
is  a  good  form  (See  Form  33)  for  such  a  book  : 


COLLATERALS.                      1 

Chicago,  Burlington  &  Quincy  R.  R.  Co. 

Promisor. 

Description  of  Collateral. 

When  due. 

Jacob  Jones. 

100  shares  at  110. 

Dec.  22,  1890. 

R.  Seivall. 

50,000  7  i  bonds. 

October  21. 

Form  33. 

One  other  point  relative  to  the  exchange  of  collaterals  deserves 
particular  notice.  In  making  time  and  demand  loans  upon  collateral 
of  bonds,  shares,  etc.,  bank  managers  are  very  particular  at  the  start 
to  scrutinize  the  character  of  the  collateral  taken.  Every  item  of  the 
securities  upon  which  the  advances  are  made  is  carefully  passed  upon 
by  the  responsible  management  of  the  bank.     So  far  so  good.     But  the 


150  PRACTICAL    BANKING. 

notes  have  no  sooner  passed  into  the  loan  of  the  bank  than  there  begms 
in  very  many  cases  a  series  of  changes  of  collateral.  The  pledgors,  in 
the  regular  covirse  of  business,  often  sell  portions  of  the  original 
collateral  from  time  to  time,  and  then  they  withdraw  these  uifU'keted 
portions  and  in  their  place  substitute  new  purchases  which  they  have 
made.  Before  the  loan  is  finally  settled  the  collateral  has  in  very 
many  cases  been  so  completely  changed  as  to  be  entirely  unlike  that 
which  was  pledged  at  the  start.  In  some  banks  I  fear  an  insufficient 
supervision  is  indulged  in  by  Managers,  Directors,  etc.,  in  regard  to 
these  changes.  The  details  are  attended  to  by  the  officers  of  the 
discount  department,  and  as  the  collaterals  themselves  are  often  left  in 
the  hands  of  these  officers,  it  is  very  natural  to  shde  into  easy-going 
habits  regarding  this  business.  Old  collateral  is  often  delivered  and 
new  collateral  taken  on  without  that  careful  consultation  with  Managers 
which  the  situation  demands.  To  obviate  this  difficulty  a  book  should 
be  kept  whose  special  work  should  be  that  of  presenting  a  clear  and 
detailed  record  of  all  the  changes  in  question  made  the  moment  the 
changes  are  made.  This  book  should  be  constantly  open  to  the  inspec- 
tion of  the  Manager  and  Directors,  and  they  should  be  expected  to  make 
their  cheek  marks  of  recognition  and  approval  of  these  current  changes. 
RESPONSIBILITY   FOR   COLLATERALS. 

He  borrowed  fifty  thousand  dollars  from  a  bank,  leaving  with  the 
bank  as  collateral  security  seventy-five  thousand  dollars  in  the  bonds 
of  a  solid  railroad.  He  was  an  experienced  and  very  heavy  borrower 
of  call  money  of  banks,  and  always  gave  the  best  of  security,  taking 
from  them  large  sums,  and  receiving  frqm  them  the  lowest  current 
rates.  The  talk  that  was  made  upon  this  care  of  collaterals  between 
this  large  negotiator  and  liis  bank,  when  the  loan  I  have  just  named 
was  made,  well  illustrates  the  situation  of  the  matter  in  question,  and 
I  reproduce  it,  premising  that,  after  this  borrower  and  lender  had  their 
say,  there  was  very  little  left  to  be  said  upon  it. 

As  the  borrower  passed  over  to  the  bank  Manager  his  pile  of 
collateral  bonds  the  banker  remarked,  as  he  has  many  times  before  to 
the  same  borrower  (for  the  matter  had  always  been  a  point  of  pleasant 
contention  between  them),  "I  suppose  you  fully  understand  that  we 
are  not  responsible  for  the  care  and  safety  of  these  bonds  beyond  the 
exercise  of  due  diligence  and  carefulness  as  custodians — the  exercise  of 
the  same  care  and  diligence  as  we  bestow  upon  our  own  securities  and 
cash  ?  These  bonds  are  your  own  property,  left  with  us  for  your  own 
convenience.  If,  after  taking  them  on  and  looking  after  them  they 
are  burglarized  or  destroyed  the  loss  is  yours  and  not  ours,  for  so  the 
Courts  have  many  times  ruled,  so  says  "Jones  on  Collateral,"  "Morse 
on  Banking,"  etc.,  and  so  rules  custom,  equity,  and  common  law  and 
common  sense." 

This  very  strong  and  most  decisive  statement  of  the  lender's  side 
of  the  case  was  met  by  the  borrower's  declaration  of  views  wliich 


THE    bank's    collaterals.  151 

embodies  about  all  that  can  be  said.-  He  sunply  remarked  :  '"You 
have  my  property  as  a  pledge  for  your  money.  I  shall  not  pay  your 
money  until  you  retui*n  me  my  bonds,  and  I  should  like  to  see  you 
attempt  to  force  me  to  do  so.  If  you  take  good  care  of  the  bonds 
you  will  not  lose  them  ;  and,  if  you  do  lose  them,  I  shall  hold  you 
responsible — shall  take  the  ground  that  you  have  been  careless,  your 
employees  dishonest,  your  vaults  insecure,  or  something  of  that  sort, 
and  in  that  event  I  shall  not  pay  my  note,  Jones  or  no  Jones,  law  or 
no  law,  to  the  contrary  notwithstanding. " 

And  this  is  where  the  matter  rests.  There  have,  fortunately,  been 
few  actual  contentions  in  this  field,  and  when  they  do  come  up  the 
battle  will  be  over  circumstances  indicated  in  the  discussion  quoted. 

COLLATERAL  VERSUS  PERSONAL  SECURITY. 
Many  private  capitalists  and  some  banks  and  bankers  who  are  in  the 
business  of  buying  paper  and  making  loans  prefer  to  make  advances 
upon  purely  personal  security  rather  than  upon  paper  accompanied 
by  collateral,  especially  coupon  bond  collateral.  Their  reason  for 
this  preference  is  found  in  the  fact  that  they  dislike  the  care  and 
responsibility  involved  in  holding  this  last-named  class  of  collateral, 
or  any  collateral  the  loss  of  which  would  cause  them  serious  trouble. 
Whatever  may  be  the  character  of  the  legal  theories  advanced  there  is 
not  a  shadow  of  a  doubt  but  that  any  promisor  who  found  the  bonds 
he  had  pledged  with  his  promise  not  forthcoming  when,  at  the  maturity 
of  his  promise,  he  made  ready  to  pay  his  note,  would  refuse  to  make  the 
payment  and  would  demand  his  collateral  before  making  a  settlement. 
Many  heavy  buyers  of  paper — investors  who  have  for  a  long  series 
of  years  made  a  practice  of  putting  all  then*  funds  into  notes  and 
acceptances — have  had  so  strong  a  prejudice  against  bond  collateral 
that  they  have  never  touched  paper  thus  fortified. 

But  there  are  large  investors  and  loaners  of  a  diiierent  opinion,  and 
as  the  institution  of  safe  deposit  companies  has  greatly  facilitated  the 
business  of  handling  collateral  loans,  they  find  quite  a  good  proportion 
of  their  patronage  commg  fi'om  private  capitalists  who  use  them  for 
the  storage  of  bonds,  etc. ,  upon  which  they  have  made  advances. 

I  hope  no  bank  officer  will  pay  so  little  heed  to  what  I  have  ^vritten 
regarding  the  safe-keeping  of  valuables  as  to  find  a  question  of  loss 
giving  a  vital  interest  to  the  following  regarding  the  finding  of  property : 

In  Massachusetts,  the  law  in  regard  to  the  ownei-ship  of  property  found  in  a  shop, 
oflBce,  etc.,  is  as  follows : 

If  the  property  is  in  such  a  position  as  to  indicate  that  it  was  placed  there  volun- 
tarily and  then  f or^rotten  and  left,  as,  for  example,  if  it  is  found  on  a  table,  counter, 
or  desk,  the  store-Keeper,  bank,  etc.  (as  the  case  may  be),  is  entitled  to  the  possession, 
as  against  the  finder. 

But,  if  the  property  is  found  in  such  a  position  as  to  indicate  that  the  owner  never 
Intended  to  place  it  thm-e— for  example,  on  the  floor — the  tinder  is  eatitled  to  keep  it, 
as  against  everybody  but  real  owner.  (McAvoy  vs.  Medina,  11  Allen,  548  ;  Bridges  us. 
Hawksworth,  21  L.  J.  Q.  B.,  75.) 

This  is  subject  to  the  statute  provision  by  which  the  city  or  town  in  which  the 
property  is  found  is  entitled  to  one-half  its  appraised  value.    (P.  S.  Mass.,  c.  95.) 


152 


PRACTICAL    BAXKIXG. 


I  end  this  chapter  by  presenting  an  ancient  Boston  bank  collateral 
form  of  note  (see  Form  34),  the  original  of  which  is  in  the  collection 
of  antiquities  belonging  to  Hon.   Robert  Black,  of  Brooklyn,  Is.  Y. : 


rp^Mmpf^^^t^^mpMM^^ 


JBOSTO^S",  ^^/-'(^'Ov—'  181 3  .  For  value  received,  (Sy  jTomiSR  la 
j)ay  JOHJS"  P.  CLJIBE,  Esq.  Cashier  oftheStaie  Bank,  or  to  Tiis  successor 
or  successors,  injthat  office,  or  to  Ms  or  their  Order,  at  the  Stale  Bank  in 
Boston, 


days  from  date,  and  grace. 


KNOW  ALL  IMEN,  THAT  I 

in  consideration  of  Dollars,  paid  mc  by  JOHN  P.CLAKK)  Es^ 

Cashier  of  the  State  Bank,  do  hereby  sell,  assign,  and  transfer  to  him  and  to  his  successon 
in  that  office,  all  my  right  and  title  to 

to  have  and  to  hold  the  same,  to  him  and  his  said  successor,' as  collateral  security,  for  lira 
payment  of  the  note  above  described,  which  note  has  been  discounted  at  said  Bank,  and  thd 
same  Stock  is  to  remain  deposited  in  the  office  of  said  IBank,  and. in.  case  the  same  nolo 
shall  not  be  paid  in  three  days  from  the  time  ic  may  become  due,  or  la  case  the  samo 
sum,  or  any  part  thereof  should  agambe  discoimted  at  said  Bank,  the  same  note  shall 
Temain  as  security  for  the  repayment  of  any  sum,  which  may  be  discounted  thereon,  and 
if  the  sum  so  discounted  shall  not  be  paid  when  the  same  becomes  due,  from  time  -to 
lime,  then  I  agree  that  the  said  Cashier  may  cause  the  said  Stock  to  be  sold,  either  at 
public  or  private  sale,  and  the  proceeds  thereof  may  apply  in  the  payment  of  the  above 
described  note,  and  after  deducting  all  charges  attending  such  sale,  the  overplus,  if  any 
t&erc  be,  sball'bei  passed  to  my  credit  at  ihe  Stnte  Bunk,  and  xcmaia  subject;  to  my  order. 


BaaxoHi 


Form  34. 


BONDS  AND  COUPONS.  153 


CHAPTER  IX. 

BONDS  AND  COUPONS. 

Negotiable  bonds  are  simply  negotiable  time  paper,  bearing  interest 
and  passing  by  delivery. 

A  first  mortgage  coupon  bond  of  a  railroad  or  any  other  corporation 
is  a  time  mortgage  note,  the  coupon  being  a  convenient  form  for  paying 
and  endorsing  the  maturing  interest.  Printers  and  engravers  have  in 
these  modern  days  exhausted  themselves  in  the  work  of  giving  corpora- 
tion bonds  an  impressive  and  attractive  appearance,  and  lawyers, 
trustees,  treasurers  and  boards  of  finance  have  covered  some  of  them 
with  forms  restrictive,  qualifying  and  explanatory ;  yet,  after  all,  they 
are  simply  the  corporation's  promise  to  pay,  with  interest,  at  some  future 
day  a  sum  of  money. 

Investors  are  sometimes  heard  saying  of  some  homely,  cheaply 
printed,  pictureless  bond,  issued  by  some  economical  interior  town  or 
city,  that  it  must  be  a  pretty  good  bond  since  it  looks  so  poorly.  This 
way  of  talking  expresses  a  prevalent  re-action  against  the  practice  of 
making  picture-book  styles  of  coupon  bonds — a  re-action  which  has  in 
a  measure  been  fostered  by  the  fact  that  many  of  the  most  showy 
bonds  ever  thrown  upon  the  market  have,  in  the  end,  been  of  value 
only  as  wall  paper. 

In  England  I  found  bonds  were  quite  generally  termed  debentures ; 
but  the  debenture  of  our  Stock  Exchange  is  simply  a  corporation's 
unsecured  promise  to  pay — only  a  certificate  of  its  indebtedness. 

The  word  coupon  is  from  the  French  word  couper^  to  cut.  These 
little  cut-offs,  which  are  really  nothing  more  nor  less  when  surrendered 
than  an  interest  receipt  on  a  time  note — a  substitute  for  a  semi-annual 
or  quarterly  endorsement  of  interest  paid — are,  as  their  name  indicates, 
a  Continental  importation.  They  have  been  in  use  with  us  only  a 
comparatively  short  time,  and  many  a  banker  who  reads  this  without 
glasses  can  recall  the  time  when  coupons  were  not  in  existence — at  any 
rate  not  here. 

But  now  the  little,  easily  lost  and  readily  negotiated  coupon,  whose 
disappearance  amounts  to  so  much  cash,  since  it  is  good  in  any  honest 
hand,  and,  jiractieally,  is  incapable  of  being  stopped,  is  here  to  stay 
and  has  come  to  be  one  of  the  most  troublesome  vouchers  the  bank 
of&cer  is  called  upon  to  handle.  They  are  a  convenience ;  but,  viewed 
in  some  respects,  are  what  may  be  termed  a  great  trial  and  nuisance. 
They  are  always  losing  and  mislaying  themselves,  and  to  lose  one  is 


154  PRACTICAL    BAXKI^e. 

like  losing  a  gold  dollar.  It  is  easy  to  say  that,  as  a  voucher,  they  are 
too  small — uot  big  enough  in  paper,  yet  they  are  so  numerous  one 
would  hardly  dai'e  to  propose  that  then*  size  should  be  increased  for 
fear  they  would  be  monupohziug  too  luuch  room  in  the  TeUer's  eubh,  m 
Messenger's  waUets,  and  Treasurer's  vaults.  The  mere  work  of  cutting 
them  from  the  debentures  held  by  some  of  our  great  bond  owners  is  so 
tedious  that  nothing  but  the  consciousness  of  full  proprietorship  ia 
every  one  detached  can  make  such  coupon-clipping  other  than  the  most 
weai'isonie  drudgery. 

Regular  coupons,  payable,  as  they  usually  are,  to  bearer,  at  a 
specific  date,  carry  grace.  Here  is  the  common  form  in  question  (see 
Form  35),  the  very  coupon  upon  which  a  suit  was  based,  which  evolved 
the  final  decision,  still  standing  firm,  that  such  coupons  carry  grace : 


$35.     The  Indianapolis,  Bloomington  &  Western  Railway  Go. 

will   pay   the    bearer,   at   its  Agency   in   the  city  of   New   York. 

■.-thirty-jive  dollars in  gold  coin,  on  the  first  day  of 

^prtl^  187 1^  for  semi-annual  interest  on  Bond  No.  

(Signed,) 

A.  P.  LEWIS,  Secretary. 


Form  35. 

Interest  warrants  do  not  carry  grace.  Here,  too,  is  the  form  (see 
Form  36)  of  the  very  interest  warrant  which  was  in  suit  when  the  no 
grace  decision  was  reached : 


$35.  INTEREST    WARRANT. 

for  thirty-five  Dollars^  upon  Bond  No of  the 

DANVILLE,  URBANA,  BLOOMINGTON  &  PEKIN  RAILROAD  GO., 

payable  at  the  office  of  the   Farmers'    Loan    &  Trust   Co.,  in   the  city  of 

New   York,  ApvH  1.   1S7 1. 

^  (Signed,) 

W.  J.  EMENTROUT,  Secretary. 


Form  36. 

Government  coupons  may  be  collected  at  any  Sub-Treasury  of  the 
United  States  without  the  identification  of  the  bearer.  Collectors  of 
registered  Government-bond  interest  must  be  identified,  and  owners  of 
registered  bonds  of  the  older  issues  for  which  interest  checks  are  not 


BONDS   AND    COUPONS.  155 

sent  out  can  only  collect  their  interest  at  those  Sub-Treasuries  where 
they  have,  in  registering  their  bonds,  requested  that  the  United  States 
Treasurer  should  make  tlieir  interest  payable.  Coupon  bonds  are  good 
in  the  hands  of  an  honest  holder,  and  he  can  hold  them,  Jind  collect 
their  coupons,  all  caveats  and  stoppages  of  payment  to  the  contrary, 
no  matter  if  they  have  been  stolen  a  dozen  times  and  can  be  positively 
identified  as  many  times  by  honest  parties  from  whom  they  had  been 
stolen  after  honest  purchase  in  the  open  market. 

Patent  coupon  cutters,  of  cunning  device,  have  been  invented.  I 
have  exammed  and  tried  many.  The  best  of  them  are  good  workers, 
on  some  bonds,  when  the  bonds  are  in  fitting  shape  and  order.  But  at 
tunes  the  best  coupon  cutter  ever  plaiuied  must  give  way  to  what  may 
be  termed  the  hand-picking  process — the  simple  cutting  of  one  coupon 
at  a  time  with  a  pair  of  scissors. 

REGISTERED    BONDS. 

If  a  holder  of  registered  bonds  loses  his  certificate,  he  has  only  to 
notify  the  Treasui-y  Department  of  his  loss  in  order  to  protect  himself 
against  all  trouble,  for  the  bonds  will  not  be  available  to  any  other  person 
unless  transferred  by  the  original  holder.  In  case  of  the  destruction  of 
registered  bonds,  by  lire  or  otherwise,  the  loser  can  procure  from  the 
Treasury  Department  new  certificates  by  presenting  proof  of  the 
destruction,  the  usual  guarantee  bond,  and  a  full  description  of  the 
marks  and  numbers  of  the  missing  certificates. 

There  is  one  point  about  the  transfer  of  registered  bonds  that  should 
be  carefully  borne  in  mind.  The  certificate  of  transfer  upon  the  back 
of  these  bonds  is  sometimes  forged,  and  care  should  be  taken,  in 
purchasing  this  class  of  securities,  to  deal  only  with  honest  and 
properly-identified  parties.  They  should  never  be  bought  of  strangers 
or  suspicious  characters. 

And  it  is  not  well  to  hold  registered  bonds  which  have  been 
transferred  in  blank — that  is,  to  hold  them  as  a  permanent  investment. 
The  transfer  should  be  made  complete  by  transmission  to  Washington 
at  the  earliest  possible  moment.  It  is  nearly  as  unsafe  to  hold  these 
incompletely-transferred  bonds  as  it  is  to  hold  coupon  bonds. 

"When  these  blank  transferred  bonds  are  purchased  for  re-sale,  nmch 
risk  may  be  avoided  by  at  once  filling  up  the  blank  with  the  name  of 
the  purchaser.  When  re-sold,  a  second  assignment  may  be  made  upon 
the  same  bonds  in  the  space  left  for  that  purpose. 

DESTRUCTION    OF    UNITED    STATES    BONDS. 

The  United  States  nmst  in  the  end  profit  largely  from  the  destruc- 
tion, in  various  ways,  of  its  promises  to  pay,  which  are  so  widely 
scattered  in  the  shape  of  its  Treasury  notes,  time  bonds  and  other 
classes  of  vouchers.  It  will  also,  as  I  have  elsewhere  explained,  reap  a 
large  harvest  from  the  destruction  of  National  bank  circulating  notes. 

The  stated  exhibits  of  the  resources  and  liabilities  of  the  United 


156  PRACTICAL    BAXKIXG.  ' 

States  Treasury,  showing,  as  they  do,  large  items  of  uncalled-for 
interest  and  vast  amounts  of  outstanding  long  past-due  bonds,  indicate 
the  results  I  have  pointed  out. 

One  can  easDy  imagine  the  thousands  of  ways  in  w'hich  Government 
promises  to  pay  are  placed  beyond  redemption.  They  go  up  in  fire  and 
smoke,  they  go  down  in  ships,  they  are  worn  out.  lost  and  scattered  in 
all  sorts  of  ways. 

A  single  striking  illustration  of  this  point  comes  to  mind.  The 
young  man  came  rushing  into  the  office  of  a  large  dealer  in  United 
States  bonds  in  great  excitement.  The  situation  was  this.  His  father 
had  suddenly  gone  crazy,  and  had  deliberately  tlrrown  into  a  blazing 
stove  $5,000  United  States  bonds  bought  of  that  very  house.  The  son 
had  entered  the  room  where  the  work  of  destniction  was  going  on  just 
in  season  to  see  the  ashen  remains  of  the  burnt  securities.  There  they 
lay,  clearly  indicating  what  had  been  done,  for  the  sheets  of  unbroken 
cinders  could  actually  be  read.  The  son  had  preserved  these  charred 
remains — in  fact,  had  not  dared  to  touch  them,  for  fear  they  would 
crumble  out  of  sight,  but  had  kept  them  in  the  stove  where  they  had 
blazed,  and  was  carefully  holding  on  to  the  stove.  The  Government 
bond  dealer's  only  advice  to  the  panic-stricken  young  man  was  to  have 
the  stove  sent  to  Washington  for  redemption,  and  I  have  the  impression 
that  this  was  done,  and  that  the  United  States  finally  paid  for  the  bonds. 

But  in  how  many  cases  are  there  losses  of  bonds  without  any  sort 
of  evidence — not  even  the  ashes  in  the  bottom  of  a  stove — to  prove 
their  loss  or  destruction  ! 

STOPPING   PAYMENT    OF    BONDS    AND    COUPONS. 

Where  bonds  and  coupons  are  not  of  the  registered  or  (as  Londoners 
term  them)  inscribed  class  their  payment  cannot,  speaking  in  general 
terms,  be  effectively  stopped.  There  are,  of  course,  exceptions  to  this 
rule.  Common  law,  custom  and  common  sense  demand  that  all  persons 
shall  exercise  caution  and  transact  business  with  their  eyes  open  so  that 
no  opportunity  can  be  taken  advantage  of  to  furtlier  schemes  of  fraud. 
It  would  be  easy  to  imagine  cases  where  Judges  and  Juries  might  hold 
purchasers  of  stolen  coupon  bonds  or  coupons  liable  for  not  exercising 
protective  care  and  prudence  in  transactions  incident  to  taking  them^ 
Whenever  cases  of  tlais  character  are  brought  into  Court  they  are  settled 
as  far  as  practicable  in  accordance  with  the  surroimding  circumstances 
and  the  laws  and  customs  governing  in  similar  instances. 

Broadly  stated,  the  gi-ound  taken  iu  business  and  financial  circles 
in  regard  to  stopping  payment  of  bonds  and  coupons  is  that  so  squarely 
assumed  by  the  United  States  in  its  coupon  transactions.  The  Treasury 
Department  does  not  now  attempt  to  caveat  or  stop  payment  of  lost  or 
stolen  (coupon  bonds  or  coupons,  or  to  assume  the  slightest  resi:)onsibility 
in  deciding  questions  of  disputed  ownership,  but  recognizes  only  the 
hearer  as  entitled  to  payment.  Courts  have  decided  over  and  over 
again  that  a  coupon  bond  payable  to  the  bearer  is  good  in  the  hands 


BONDS    AND    COUPONS.  157 

of  an  innocent  and  bona  fide  holder  Avho  has  obtained  it  in  an  innocent 
manner  by  honest  purchase  at  a  reasonable  market  price,  though  the 
bond  may  have  been  lost  by  or  stolen  from  another  person. 

Bankers  and  general  dealers  in  securities  often  buy  and  sell  bonds 
■which  liave  been  very  extensively  advertised  as  lost  or  stolen  and  their 
payment  "stopped,"  and  it  is  easy  to  see  why  this  position  regarchng 
coupon  bonds  and  coupons  assumed  by  the  Government,  and  which 
has  been  generally  received  as  a  correct  (me,  is  the  only  ground  Avhich 
can  be  deemed  consistent  with  the  exigencies  of  cases  hkely  to  arise. 
The  only  practical  way  out  of  this  stopping-notification  business  is  to 
take  no  cognizance  of  the  caveats. 

There  is  constantly  falling  a  steady  shower  of  notices  of  stolen 
United  States  bonds,  giving  all  theu*  marks  and  numbers  and  full 
particulars  of  the  time  and  manner  of  their  taking  off  by  the  thieves; 
but  these  circulars  generally  go  into  the  waste-baskets  of  the  bankers 
and  brokers  receivmg  them. 

Not  long  ago  a  banker  had  m  hand  a  large  pile  of  coupon  Govern- 
ments, fully  identified  as  being  the  late  property  of  an  interior  National 
bank,  from  which  they  had  been  masked-burglarized  within  a  very 
short  time  by  a  party  of  the  fashionable  gagging  vault-smashers  of  the 
period.  The  interview  with  the  present  holder  of  the  wandering  bonds 
was  interesting,  but  not  profitable,  as  far  as  the  robbed  bank  was 
concerned.  The  new  holder  politely  tendered  all  the  assistance  in  his 
power  to  aid  in  the  search  for  the  rogues  in  the  ease,  and  offered  to  sell 
his  bonds  to  their  old-time  owner  at  the  lowest  market  prices. 

I  have  heard  parties  speculate,  when  receiving  packages  of  hundreds 
of  thousands  of  dollars  in  coupon  United  States  bonds,  as  purchase  or 
collateral,  upon  the  number  of  times  the  bonds  may  have  been  stolen 
from  somebody  or  another. 

It  is  absolutely  impossible  for  the  banks  and  bankers  to\;ompare  the 
quantities  of  coupons  which  pass  through  their  hands  for  collection  Avith. 
these  hsts  of  the  marks  and  numbers  of  the  stopped  coupons,  even  if 
they  attempted  to  preserve  and  keep  the  run  of  them,  and  the  question 
is  very  like  that  of  stopping  Bank  of  England  notes.  Notices  of  such 
stoppages  of  payment  are  being  constantly  advertised  in  London  papers 
and  sent  to  the  Bank  of  England.  The  Bank  will  pay  all  its  genuine 
notes  held  by  honest  hands  whether  stopped  or  not.  The  only 
advantage  of  these  notifications  is  the  use  which  may  be  sometimes 
made  of  them  in  tracing  back  stolen  notes  to  thievish  hands.  The 
Bank  of  England  lends  a  hand  in  this  work,  for,  when  stopped  notes 
are  presented  there  full  observation  is  taken  by  comparing  them  with 
the  marks  and  numbers  of  the  lists  and  notifications  of  the  lost  or 
stolen  notes  which  are  always  kept  at  hand  in  the  bank,  and  the 
presenter  may  be  called  upon  to  show  where  he  received  them.  Outside 
of  the  bank  the  lost  and  stolen  notes  which  have  been  "stopped," 
travel  as  weU  as  any  other,  since  it  is  utterly  impracticable  for  the 


158 


PRACTICAIi    BAXKIXG. 


public  to  make  any  discrimination.  In  this  country,  attempts  have 
sometimes  been  made  by  large  losers  of  coupons  and  coupon  bonds  to 
secure  from  banks,  through  medium  of  the  express  companies,  receipts 
for  notifications  of  stoppages  of  payment  delivered  them.  Banks  should 
not  make  such  acknowledgments,  since  they  must  not  concede  that  it 
is  their  duty  to  recognize  any  binding  force  in  these  notifications. 

HANDLING    COUPONS. 
"Wlien  dealers  deposit  their  coupons  at  their  bank  they  should  care- 
fully hst  them.     Here  is  a  good  form  (see  Form  37)  of  coupon  deposit 
ticket  or  invoice : 


N(3s.  ON  Coupons 


Number 
oJ-CoujjonS 


Amount 
each  Coup, 


Total  AmouNT 


^/jyCM^^^ot  ^U^^a^ 


7^ 


^ 


!^/-  ^ 


i.y3   .S^.i 


/dD 


(J/,^^-3  ■  -3  /,<^oY 


'Zf 


yo 


..^--^d^/t^i^^^i^ ,  "^.^^ 


'.^^/^<tru  '£/ 


r 


U 


'^ 


^^^X//  ■  ^^(;^o/^J 


/ 


i^/iP^/J-  ^^ 


6 


^<Lr 


o 


^ 


/T"-^ 


CJ^ 


(lTo 


/2- 


HU-iyH.' 


~Z7Ms 


/^^J'  ■  ^^^AT/lrz- 


/■O.O^/'  /O.-S'^^ 


/cT 


^O 


.^A^^<^0 


Form  37. 

Where  coupons  are  cut  from  registered  coupon  bonds,  and  passed 
by  the  owner  through  the  bank  or  other  collection  avenue,  they  must 
be  accompanied  by  an  order  from  the  person  in  whose  name  they  are 
registered  for  their  pajmient  to  the  collecting  agent. 

The  Treasurer  of  one  of  our  States  takes  the  ground  that  the  coupons 
themselves  must  be  endorsed  \vith  this  order.  But  coupons  have  not 
a  paper  back  which  is  roomy  enough  for  such  an  endorsement  or  which 
was  ever  intended  to  be  so  used. 

The  United  States  issues  no  inscribed  coupon  bonds.     Its  registered 


BONDS    AND    COUPONS.  159 

« 

bonds  are  simply  consols — couponless  certificates,  and  the  interest  upon 
the  same  is  sent  to  the  owner  in  the  form  of  a  payable-to-order  Treasury 
draft,  the  endorsement  of  which  is  the  receipt  which  the  registered 
holder  gives  for  his  interest. 

When  banks  send  coupons  away  by  mail,  registered  mail,  or  express, 
for  collection,  they  should  be  carefully  enclosed  in  marked,  numbered 
and  labeled  envelopes.  Here  is  an  excellent  form  (see  Form  38)  for 
envelopes  required  for  this  coupon  use: 


From 

FIRST  NATIONAL  BANK,  of  Chicago. 
Coupous  Chicago  and  Western  Michigan  Rway  7^s. 

15     at     35        $  525.   = 
8     at     17.50  $  UO.  = 
at  $  


Account  of  A.  Hood,  Trustee.  $  665.  = 

PliBASB  ENCLOSE  COUPONS  OF  ONLY  ONE  COKPOBATION  IN  EACH  ENVELOPE. 


Form  38. 
A   DEMORALIZING   PRACTICB. 

There  are  bankers  and  others  who  see  nothing  wrong  in  under- 
valuing packages  of  bonds,  coupons  and  negotiable  securities  forwarded 
by  express  which  go  tlirough  the  money  departments  of  these  common 
carriers  and  receive  the  best  transportation  and  protection  that  can  be 
afforded.  People  who  avail  themselves  of  the  services  of  an  express 
company  should  understand  distinctly  that  the  practice  we  have  in 
mind  is  not  an  honest  one.  The  individual  who  deliberately  marks  a 
value  of  one  thousand  dollars  on  a  package  of  ten  thousand  dollars  in 
money  or  uninscribed  coupon  bonds  and  sends  it  by  express  from  New 
York  to  Chicago  on  an  express  receipt  and  express  charge  for  only 
a  thousand  dollars,  is  guilty  of  a  deliberate  fraud  upon  the  express 
company.  In  doing  this  he  undoubtedly  argues  with  himself  that  it  is 
all  right,  since  the  company  cannot  be  made  responsible  to  liim  in  case 
of  loss  for  more  than  the  sum  he  has  marked  on  the  package,  and  which 
they  have  receipted  for,  and  that  he  has  only  put  upon  them  the  risk 
and  responsibility  of  the  smaller  sum  for  which  he  has  paid.  But  this 
superficial  reasoning  does  not  by  any  means  cover  the  point.  Fairly 
stated,  the  express  company  may  be  said  to  have  carried  for  him  nine 
thousand  dollars  for  which  he  has  not  jmid,  and  they  are  deceived  and 
defrauded  by  him  to  this  extent. 

He  has  availed  himself  of  all  the  facilities  the  company  has  at  its 


160  PRACTICAL    BANKING. 

disposal  for  the  carriage  in  safety  of  valuable  packages,  and  has  not 
paid  for  the  services  he  has  received. 

Maniigers  of  express  companies  are  justifiably  indignant  over  the  wide 
prevalence  of  this  undervaluing  practice.  The  Superintendent  of  one 
of  the  largest  express  companies  not  long  ago  declared  that  he  would 
never  take  a  package  a  second  time  from  a  sender  who  had  been  known 
to  undervalue  and  underpay,  Avithout  having  the  contents  of  the 
package  shown  to  him  before  he  receipted  for  it,  nor  would  he  deUver 
packages  to  such  offenders  without  demanding  a  sight  of  their  contents 
before  he  settled  for  their  carriage. 

Not  long  ago  coupons  amounting  to  over  $20,000  marked  "no  value  \ 
were  sent  through  an  express  company  on  a  charge  of  fifty  cents.  The 
package  was  lost,  and  the  most  troublesome  and  costly  complications 
arose  as  a  consequence  of  the  fraud. 

Undervalued  packages  sent  by  express  to  the  United  States  Treasury 
are  always  reported  at  once  to  the  express  companies  by  the  department. 


THE    CASUIEK. 


CHAPTER    X. 

THE    CASHIER    AND    HIS    DUTIES. 

His  general  duties  and  responsibilities  are  well  defined  in  the 
National  Bank  Act.  His  unwritten  duties  and  responsibilities  are 
those  of  which  I  propose  to  speak  in  this  section. 

The  bank  Cashier  is  the  chief  executive  and  administrative  oflBlcer 
of  his  bank.  He  represents  the  will  of  the  President  and  Directors, 
and  sees  to  it  that  their  will  and  wishes  are  carried  into  effect ;  but 
beyond  this  it  is  very  important  that  he  should  never  for  a  moment 
forget  that  bank  Casliiers  are  special  and  independent  and  responsible 
oflBLcers — chief  executive  officers — of  their  corporations,  and  not  mej-e 
representatives  and  subordinates  of  Presidents  and  Directors.  They 
are  quite  apt  to  gravitate  towards  the  last-named  view  of  their  status 
— their  situation  and  vocation — simply  because  they  are  chosen  by  a 
Board  of  Directors  and  hold  their  positions,  as  it  were,  at  their  will. 
Nevertheless  they  are,  purely  and  simply,  in  all  important  points, 
officers  and  representatives  of  the  shareholders,  and,  looking  to  final 
results,  the  shareholders  are  the  parties  to  whom  they  must,  in  case  of 
stress,  make  final  appeal,  and  who  will,  under  all  circumstances,  hold 
them  responsible  for  the  faithful  and  proper  discharge  of  their  legiti- 
mate duties  which  are,  as  I  have  said,  largely  of  an  executive  character, 
and  clearly  defined  in  the  Bank  Act,  the  common  law  of  the  United 
States,  and  the  decisions  of  equity  practice. 

The  Cashier  who  would  wish  to  be  fully  equipped  for  his  place  must 
be  a  constant  student  of  his  business.  He  must  keep  himself  fully 
acquainted  with  the  banking  laws  under  which  he  is  working,  watching 
carefully  every  item  of  new  legislation  bearing  upon  his  profession.  He 
must  read  the  reports  of  the  cases  in  law,  witlxthe  decisions  reached,' 
of  those  interesting  banking  suits  which  have  had  such  an  important 
bearing  upon  the  work  of  defining  the  duties  and  responsibilities  of 
bank  Cashiers.  In  a  word,  he  must  make  himself  as  thoroughly 
conversant  with  the  laws,  customs  and  practices  which  have  to  do 
with  his  position  as  his  time  and  strength  will  permit.  It  is  a  satis- 
faction to  know  that  what  may  be  termed  the  banking  literature  of  the 
day  is  steadily  placing  within  his  reach  classified  information  upon  all 
points  relative  to  his  profession. 

It  is  the  duty  of  the  Cashier  of  a  bank  having  many  departments 
and  a  large  corps  of  officers  to  see  that  all  their  work  is  well  and 
promptly  performed,  and  to  give  his  attention  to  a  general  oversight 


1G2  PRACTICAL    BANKING. 

of  the  labors  of  his  subordinates  rather  than  to  the  personal  discharge 

AA  the  details  of  any  division  of  the  laboi-  that  is  going  on  about  him. 

/  The  Directors  of  the  bank  have  a  right  to  expect  that  he  understands 

I    all  about  the  business.     They  are  supposed  to  give  him  all  the  help  he 

needs.     They  hold  him  responsible  for  the  good  conduct  and  faithful 

work  of  this  help.     The  experienced  and  competent  Cashier  has  little 

I    ambition  to  make  loans  for  the  bank,  or  to  exercise  an  undue  mfluence 

1   ui  the  matter  of  extending  credits  of  any  description.    He  understands 

\\  that  the  Board  of  Directors  exists  for  that  purpose,  and,  that  if  they 

"do  their  duty,  they  will  attend  to  this  loaning  business. 

In  the  running  of  the  complicated  machinery  of  which  he  is  the 
executive  head  and  chief  manager,  he  will  find  that  a  large  share  of 
his  time  is  taken  up  in  settling  properly  nice  questions  of  action  in  the 
vast  number  of  cases  of  practical  banking  which  are  brought  before 
Mm  by  the  heads  of  the  various  departments.  He  is  expected  to  know 
the  rights  and  duties  involved  in  every  case,  and  to  decide  safely 
and  promptly  on  all  matters  at  issue.  Much  of  his  time  must  also  be 
consumed  in  holding  audiences  with  dealers  and  the  general  public 
who  for  one  purpose  or  another  are  often  found  calling  upon  ' '  our 
bank." 

The  Cashier  ought  to  understand  every  book  in  his  bank.  There 
should  not  be  a  single  entry  therein  which  is  not  plain  English  to  him. 
He  ought,  in  fact,  to  understand  all  the  methods  and  machinery  of 
banking  ;  or,  at  least,  that  class  of  "banking  he  is  engaged  in.  If  at 
any  time  he  finds  himself  at  a  loss  to  comprehend  any  feature  of  it  that 
presents  itself,  he  should  lose  little  time  till  he  has  studied  himself  into 
the  desired  knowledge. 

Many  banks  are  making  a  mistake  in  requiring  their  Cashiers  to 
serve  as  Discount  Clerks.  I  am,  of  course,  now  only  referring  to  large 
banks,  which  need  a  large  corps  of  clerks.  It  is  not  a  good  plan  for  a 
large  city  bank  to  combine  these  two  offices  of  Cashier  and  Discount 
Clerk  in  one,  unless  exceptionally  light  work  and  proper  economy 
demand  such  a  doubling  up. 

He  should  have  no  other  business  on  his  hands  but  banking,  and 
that  banking,  that  of  the  institution  under  his  charge.  He  should 
make  up  his  mind,  when  he  accepts  his  position  and  his  salary,  to  be 
content  therewith  until  he  decides  to  make  a  change  in  some  direction 
that  may  seem  to  him  of  advantage.  He  should  not,  by  any  means, 
be  a  speculator,  even  in  the  mildest  way.  The  duties  and  responsi- 
bilities of  his  place  are  entirely  out  of  harmony  with  private  trade  on 
his  part  of  any  description.  And,  in  fact,  there  are  not  many  Cashiers 
who,  without  doing  injustice  to  themselves  or  to  the  institution  under 
their  charge,  can  find  the  time  and  strength  to  go  into  trade  and 
speculation  on  their  own  account.  Once  out  of  the  bank  for  the 
day.  they  will  generally  find  it  wisest  to  sink  the  shop  and  engage  m 
**  recreations  "  of  a  very  unbusinesslike  character,  such  as  out-of-door 


THE    CASHIER. 

exercise,  the  enjoyment  of  pleasant  society,  books,  art,  music,  i 
innocent  and  profitable  hobbies  of  various  descriptions. 

There  is  one  delicate  matter  relative  to  a  Cashier's  duties  that  must 
not  be  overlooked.  It  is  particularly  incumbent  upon  him  to  see  that 
all  his  ofiicers  treat  every  customer— dealer — who  enters  the  bank  with 
the  extremest  courtesy.  And  in  his  intercourse  with  liis  subordinate 
officers  he  should  also  present  an  example  of  that  courtesy  of  manner 
which  he  wishes  them  to  show  in  their  intercourse  with  depositors,  etc. 

A  bank  Cashier  should  never  reprove,  or  find  fault  with,  any  of  liis 
clerks  in  the  presence  of  customers  of  the  bank;  or,  if  it  can  possibly 
be  avoided,  in  the  presence  of  their  fellow  officers. 

In  most  of  our  banks  these  suggestions  may  not  be  needed.  In 
exceptional  cases  they  may  not  be  out  of  place. 

I  will  add  a  few  more  words  as  to  the  relations  between  a  Manager 
and  his  clerks. 

Their  relation  to  each  other  should  not  only  be  harmonious,  but 
should  also  be  heartily  co-operative — a  word  which  I  am  here  using  in 
a  sense  which  will  need  a  little  explanation.  I  mean  to  be  understood 
as  saj'ing  that  that  bank  moves  along  best  in  the  management  of  its 
methods  and  machinery,  where  superior  officers  and  subordinates  labor 
the  most  helpfully  together  towards  one  end — that  end  being  the  safe 
and  successful  administration  of  the  affairs  of  their  bank. 

Every  Cashier  should  make  it  a  special  point  to  give  his  officers 
every  practicable  opportunity  for  learning,  in  the  most  thorough 
manner,  the  business  they  are  following — should  do  this,  not  only  for 
their  own  good,  but  for  the  good  of  the  bank  in  which  they  are  laboring. 
The  more  the  officers  are  brought  out  —  developed  —  so  much  more 
valuable  they  will  be  to  their  institution,  and  the  more  satisfaction  they 
will  take  in  their  daily  routine  of  work.  Superior  officers — Presidents, 
Casliiers,  etc. — should  understand  that  their  own  special  duties  will 
be  lightened,  and  the  general  business  of  the  bank  facilitated,  by  the 
freest  consultation  with  the  men  who  are  attending  to  the  details  in 
the  various  departments  of  their  institution. 

There  are  points  about  which  these  subordinates  can  give  the 
Manager  much  valuable  information  —  or  call  it  instruction  —  of  a 
character  which  it  will  be  difficult  for  him  to  obtain  elsewhere ;  and  the 
superior  officers  place  themselves  at  a  great  disadvantage  when  they 
show  an  aversion  to  receiving  hints  and  suggestions  from  those  under 
them. 

There  is  an  old  saying  that  two  heads  are  better  than  one.  Another, 
that  two  pairs  of  eyes  are  better  than  one.  We  might  as  well  add  to 
these  saws  another  aphorism,  which  is,  that  two  memories  are  better 
than  one.  — 


Many  a  hard-pressed  bank  Cashier  might  reaUze  the  truth  of  this 
last  expression,  and  profit  by  it,  if  he  would  utilize  to  the  best  advantage 
the  talent  that  is  working  with  him  by  leading  his  officers  into  a  habit 


164  PRACTICAL    BAXKIJJQ, 

of  looking  with  him  into  every  important  question  of  bank  management 
that  comes  up  in  tlieir  circle  of  business,  so  that,  when  matters  of  a 
similar  character  again  present  themselves,  he  could  have  their  intelli- 
gent co-operation  in  the  settlement  of  difficult  points. 
PRESIDENTS  AND  CASHIERS. 
The  relations  between  these  two  officials  should  be  of  the  most 
frank,  cordial  and  agreeable  character. 

There  cannot  be  two  heads  of  one  bank;  and  where  there  is  an 
axjtive  and  capable  working  President,  chosen  for  the  purpose  of  actmg 
as  the  head  and  front  of  the  bank,  and  paid  for  that  service,  the  Casliier 
of  the  same  bank,  no  matter  how  able  and  experienced  he  may  be, 
must  consider  that  his  role  is  very  like  that  of  a  Lieutenant-Colonel  in 
the  presence  of  the  Colonel.  He  must  be  content  to  play,  to  a  certain 
extent,  a  subordinate  part.  In  sucn  cases  the  President  and  Cashier 
have  each  their  well-defined  and  distinctive  duties,  and  there  is  not 
the  slightest  need  of  any  conflict  of  authority.  What  these  distinctive 
duties  are  I  define  elsewhere.  And,  as  these  head  officers  move  along 
together,  spending  the  best  part  of  their  hves  in  each  other's  company 
and  both  giving  their  time  and  strength  to  the  work  of  running  the 
bank  under  their  charge,  they  should  endeavor,  by  the  exercise  of 
mutual  patience,  charity  and  manliness,  to  make  their  ways  of  life  at 
the  bank  as  agreeable  as  possible;  and  where  the  relations  between 
President  and  Cashier  are  what  they  should  be  —  where  they  each 
understand  their  duties,  and  aim  to  discharge  them  rightly — the  official 
whom  we  have  termed  a  subordinate  in  many  respects  may  yield  due 
defeience  to  the  position  above  him  without  giving  up  one  iota  of  his 
self-respect  or  manly  independence.  In  many  points  the  position  he 
holds  is  a  more  enviable  one  than  that  of  the  higher  officer.  He  is 
called  upon  to  shoulder  less  responsibility  than  that  which  must  be 
assumed  by  the  President ;  and  responsibility  is  something  which  men 
of  the  largest  experience  are  the  least  fond  of  taking,  since  results  and 
consequences  are  so  often  disappointing. 

The  Cashier  should  carefully  avoid  carping  and  criticising  remarks 
regarding  the  management  of  his  President  and  Directors.  It  is  about 
time  for  him  to  either  reform  or  cut  adrift  from  his  bank  if  everything 
there  for  which  he  is  not  himself  directly  responsible  is  so  managed  as 
to  lead  him  to  spend  much  of  his  tiiue  in  growling  about  the  doings  of 
his  President. 

It  is  a  very  good  rule  for  a  Cashier  never  to  say  anything  about  his 
President's  management  which  he  would  not  like  to  have  the  President 
hear  or  would  not  be  willing  to  say  in  his  presence. 

And  it  is  well  for  the  President  to  adopt  the  same  platform. 

Cashiers  and  Presidents,  who  are  not  in  their  bank  life  and  work  in 

the  best  of  relations  towards  each   other,   lead   a  very  unattractive 

business  life.     I  have  observed  instances  where  a  Cashier's  steady  habit 

of  placing  himself  in  a  chronic  attitude  of  mental  hostility — dissatis- 


THE    CASHIER.  165 

faction  with  his  President  and  all  his  ways— has  so  reacted  upon  himself 
as  to  render  hhu  a  most  unpleasant  and  most  unhappy  man. 

THE    SPECIAL    DUTIES    BELONGING   TO    THE    CASHIER. 

Beyond  the  work  and  care  described  as  devolving  upon  the  Cashier 
there  is  a  round  of  duties  supposed  to  belong  especially  to  his  department 
and  to  which  he  is  expected  to  give  particular  attention. 

HIS    SIGNATURE. 

The  Cashier  is  the  chief  representative  of  the  bank  in  the  matter  of 
his  signature.  It  is  difficult  for  a  bank  to  go  behind  it  or  do  anything 
without  it.  Wherever  he  signs,  in  his  official  capacity,  and  within  the 
limits  of  his  authority,  the  bank  is  irrevocably  held,  and  his  authority, 
as  banks  have  discovered  in  cases  where  they  have  contested  his 
signature,  is  very  wide.  The  limits  set  upon  its  binding  power  are  quite 
well  defined  in  several  recent  great  legal  contests — notably  those  in 
which  Mellen,  Ward  &  Mower  involved  the  State  Bank  and  Merchants' 
Bank,  of  Boston,  and  to  Avhich  the  United  States  was  a  party.  These 
famous  cases  have  been  fully  reported,  and  every  student  of  banking, 
who  wishes  to  follow  further  the  point  we  have  in  hand,  is  advised  to 
make  a  careful  study  of  them.  In  these  suits  the  late  B.  R.  Curtis 
made  some  of  the  most  valuable  and  interesting  presentations  of  facts 
and  arguments  bearing  upon  the  Cashier's  signature  powers. 

The  Cashier  of  a  bank  signs,  in  connection  with  the  President  or 
Vice-President  of  the  institution,  all  the  circulating  notes  issued.  If 
he  does  not  do  this  in  his  own  handwriting  he  does  it  in  spirit  through 
the  hands  of  the  printer,  who  stamps  upon  the  bank  bills  the/ac  simile 
of  his  signature,  of  which  the  Cashier  has  careful  custody,  and  which 
in  its  place,  holds  the  bank  fully  responsible. 

Attempts  have  been  made  by  the  bank  authorities  at  Washington 
to  deprive  banks  of  the  privilege  of  printing  their  signatures  upon  bills; 
but  the  condemnation  of  this  practice  by  a  Treasury  Department  which 
introduced  and  maintains  the  use  of  fac  simile  signatures  on  every 
variety  of  its  own  enormous  issues  is  extremely  inconsistent  and  has 
not  been  enforced. 

The  National  banks  are  everywhere  in  the  habit  of  using  these 
labor-saving  and  extremely  convenient  stamped  signatures  upon  their 
bills. 

The  Cashier  signs  the  checks  of  a  bank  and  affixes  its  endorsement 

where  such  is  needed.     He  also  signs  all  reports  and  returns  made  to 

the  Government.     In  these  cases  the  President   may  alternate.     He 

signs,  with  the  President,  all  certificates  of  ownership  of  the  capital 

stock  of  the  bank. 

THE    CORRESPONDENCE. 

The  Cashier  of  a  bank  is  supposed  to  attend  to  all  its  correspondeuce, 
to  send  out  all  its  letters,  and  to  receive,  open  and  reply  to  all  letters 
addressed  to  the  bank.     If  he  does  not  do  all  this  with  his  own  hands 


166  PRACTICAL    BAXKIXQ. 

and  eyes,  as  he  is  likely  to  do  where  his  bank  is  a  small  one  and  its 
correspondence  comparatively  light,  he  does  it  through  his  "doubles" 
— his  Assistant  Cashiers  and  Corresponding  Clerks.  Where  what  may 
be  termed  tlie  more  mechanical  part  of  this  correspondence  busmess 
is  deputized,  as  is  the  case  in  large  banks,  the  deputies  who  may  open 
and  answer  letters  would  be  deemed  entirely  remiss  in  their  duties  if 
they  were  to  allow  a  single  bank  letter  to  come  into  or  go  out  of  the 
bank  relating  to  anything  not  of  the  simplest  routine  character  without 
both  letter  and  reply  being  submitted  to  the  Cashier. ' 

In  some  banks  the  rule  prevails  that  the  Cashier  shall  sign  every 
letter  that  the  bank  sends  forth.  As  I  have  hinted,  this  cannot  be 
done  where  the  con'espondence  is  extremely  heavy,  and  in  such  cases 
the  matter  should  be  compromised  by  the  establishment  of  a  system, 
requiring  him  to  sign  or  revise  all  letters  of  special  significance. 

In  the  supervision  and  general  conduct  of  the  correspondence  of  a 
large  bank,  the  Casliier  who  is  ready  to  grasp  at  all  short-hand  processes 
wDl  be  quite  sure  to  summon  to  his  aid  the  stenographer  and  the  type- 
writer. These  two  workers,  if  we  may  thus  express  ourselves,  are  now 
quite  commonly  combined  in  one  person.  The  Cashier  dictates  to  the 
stenographer,  and  tlie  stenographer  turns  to  his  Avriting  machine  and 
makes  ready  thereon  a  fair  copy  of  the  dictated  letter,  submitting  the 
same  to  the  Cashier  for  his  approval  and  signature. 
RECORDS    AND    BOOKS. 

The  Cashier  has  generally  the  duty  of  recordmg  all  meetings  and 
transactions  of  the  Board  of  Directors,  and  this,  of  course,  should  be 
done  promptly  and  with  the  greatest  exactness. 

He  also,  no  matter  how  large  his  bank  may  be,  how  extensive  and 
complicated  its  business  or  numerous  its  departments,  sliould  under- 
stand and  be  closely  observant  of  all  the  methods  and  machinery  of 
the  institution  in  liis  charge — should  know  all  that  is  there  being  done 
and  also  just  how  it  is  being  done.  He  should  have  the  reins  well  in 
hand,  and  know  well  all  the  ramifications  of  his  route.  At  tlie  opening 
of  each  day  he  should  know  just  how^his  bank  is  situated  and  the  trend 
<5f  its  movemenEs^  When  the  gate  is  shut  at  the  close  of  the  day's 
business,  and  the  luaehinery  ceases  to  run  and  the  wheels  to  revolve,  he 
should  also  know  about  where  his  bank  stands. 

With  this  aim  his  book-keeping  will  be  of  a  general  nature  and  deal 
with  the  totals  resulting  from  the  work  of  the  different  departments. 

On  page  167  is  a  form  he  may  adopt  with  advantage  (see  Form  39). 
In  a  few  moments  of  each  day  he  can  cast  his  eye  over  the  principal 
books  of  liis  bank  and  from  them  coUect  what  may  well  be  termed 
thermometrical  figures,  and  throw  them  into  this  shape — a  shape  that 
may  be  balanced  into  a  result  which  will  have,  to  him,  an  index-like 
character,  and  which  will  reveal  to  him  at  a  glance  the  position  and 
drift  of  his  institution.  In  collecting  these  figures  he  should  remember 
to  go  to  original  sources,  as  far  as  possible,  and  not  to  subidsiary  books. 


THE   CASHIER. 


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16S  PRACTICAL   BANKING. 

These  figures  might  be  all  taken  direct  froom  the  Book-keeper,  but 
they  may  be,  and  should  be,  gathered  from  the  Tellers,  Discount 
Clerks,  etc. 

We  here  give,  in  detail,  a  full  explanation  of  all  these  figures — an 
explanation  that  needs  only  to  be  brief,  since  the  statements  are  so 
systematically  arranged  that  they  are  easily  understood.  They  are 
two  consecutive  days'  work ;  an  explanation  of  one  is  an  explanation 
of  both. 

We  have,  under  date  of  Monday,  July  14,  1890,  an  abstract  of  the 
transactions  of  the  bank  on  that  day,  with  a  schedule,  showing  in 
detail  and  aggregate,  the  cash  resources  of  the  bank  at  the  close  of 
the  day — a  cash  balance  with  wliich  to  start  on  the  morning  of  the  15th. 

The  debits  of  the  day  are  as  follows  : 

Deposits  :  the  gross  amount  of  deposits  taken  from  the  Receiving- 
Teller's  books,  deposits  of  all  descriptions  for  which  depositors  are 
given  immediate  credit. 

Loan  :  notes  discounted  that  have  been  paid.  These  figures  from 
discount  department. 

Interest  :  money  received  for  interest  from  all  sources.  This  from 
the  Paying- Teller. 

Exchange:  money  received  from  any  direction  as  exchange  on 
collections.     Figures  from  Paying-Teller. 

Discount  :  the  gross  discounts  of  the  day,  or  perhaps  of  the  week, 
figured  out  of  notes  discounted  by  the  Discount  Clerk.  This  item 
taken  from  the  Discount  Clerk's  books. 

United  States  Treasurer:  remittances  received  from  him  in 
payment  for  bills  remitted  or  mutilated  National  bank  notes  sent  for 
redemption.     This  item  from  Paying-Teller's-book. 

Circulation:  new  bank  notes  of  the  bank's  own  issue  received 
from  Comptroller  of  the  Currency.    This  item  from  Paying-Teller's  book. 

Turning  to  credits,  we  have — 

Checks  :  this  item  from  Paying-Teller's  book,  shows  entire  amount 
of  checks  paid  during  the  day. 

Loan:  this  item  the  gross  amount  paid  out  for  net  of  paper 
discounted.     The  figures  are  taken  from  the  Discount  Clerk's  book. 

Expense  :  this  from  Paying  Teller's  accounts.  All  bills  paid  in  the 
day — bills  of  every  class,  which  are  the  incidental  expenses  of  running 
the  bank,  such  as  salaries,  stationery,  fuel,  etc. ,  etc. 

Interest:  this  may  be  rebates  on  prepaid  discounted  paper,  or 
interest  upon  deposits.  The  item  is  made  up  of  figures  from  Discount 
Clerk's  books  and  the  Paying-Teller's. 

Exchange:  this  from  Paying-Teller's  books;  costs  of  collections 
made,  charges  on  foreign  paper. 

Dividends:  this,  dividends  paid  in  the  day.  The  dividend  was 
declared  in  April,  and  the  present  current  payments  are  slow  and 
small.     The  bulk  of  them  have  been  called  for  earUer. 


THE    CASHIER.  169 

United  States  Treasurer  :  this,  cash  sent  to  him  for  new  small 
legal-tenders,  or  something  of  the  sort. 

CiRCUiiATioN :  notes  of  the  bank's  owai  issue,  retired  in  any  way. 

The  schedule  of  cash  on  hand,  on  the  extreme  right,  is  just  what 
it  appears  to  be. 

The  figures  of  the  gold  and  silver  and  legal-tenders  of  the  bank, 
wliich  are  held  by  the  Cashier,  and  not  supposed  to  be  in  immediate 
current  use  by  the  Tellers,  appear  first.  This  cash  is  in  the  Cashier's 
vault,  and  is  by  him  passed  over  to  the  Paying-Teller  as  he  may  need  it. 

Teller:  §286,611.62.  This  is  the  cash  assets  of  the  bank,  beyond 
those  just  named,  of  all  sorts — mainly  Clearing-House  checks  for  next 
morning's  settlement,  legal-tenders,  gold  and  silver. 

THE    OFFICE    AND    VAULTS. 

The  Cashier  has  in  his  particular  charge  the  banking  rooms  which 
the  institution  occupies.  If  they  are  owned  by  the  bank  he  sees  that 
they  are  kept  in  proper  repair,  that  the  taxes  and  other  dues  upon  them 
are  disch.arged,  and,  if  portions  are  underlet,  attends  to  their  rent 
contracts  and  collections.  If  the  bank  is  simply  a  tenant  he  attends 
to  the  matter  of  lease  and  rent  payments,  and  looks  after  the  landlord 
in  regard  to  repairs  that  may  be  needed.  It  is  his  duty  to  see  that  the 
rooms  are  properly  equipped  for  work,  kept  in  order  and  neatness,  that 
his  officers  are  supplied  with  room  enough  for  the  work  in  hand,  that 
they  have  the  needful  supplies  for  their  departments,  and  as  good 
light,  ventilation  and  general  working  comfort  as  can  be  afforded,  and 
that  the  officers  who  are  by  the  nature  of  their  duties  best  accommo- 
dated by  being  placed  near  each  other  have  their  locations  thus 
arranged.  He  is  bound  to  see  that  the  dealers  with  the  bank  and  the 
general  public  that  patronizes  it  are  supplied  with  necessary  accommo- 
dations, and  what  are  termed  the  public  desks  and  counters  kept  in 
comely  order  and  supplied  with  the  necessary  stationery. 

The  vaults  and  strong  rooms  of  the  bank  are  in  the  special  custody 
of  the  Cashier.  It  is  his  duty  to  see  that  the  bank  is  supplied  with 
acconnnodations  of  this  class  of  approved  and  reliable  character,  and 
that  they  are  kept  in  the  best  condition.  If  he  does  not  personally 
lock  and  unlock  his  vaults  he  is  expected  to  see  that  these  matters  are 
most  carefully  attended  to,  and  to  be  extremely  cautious  in  deputizing 
work  of  this  character,  for  he  is  by  the  nature  of  his  office  held 
particularly  responsible  by  the  stockholders  for  the  care  of  all  the 
cash,  securities  and  other  valuables  of  the  bank. 

HOW  DO  YOU  STAND? 
Of  a  similar  character  to  Form  39  but  taking  a  slightly  different 
place  in  the  machinery  of  management  and  aiding  the  Cashier  to  keep 
up  the  closest  acquaintance  with  the  business  movements  of  his  insti- 
tution is  the  form  here  presented  (see  Form  40) — a  form  of  a  hasty, 
wholesale  sort  of  a  memorandum,  made  to  aid  the  memory  of  the 


170 


PRACTICAL    BANKING. 


Cashier  as  he  moves  tlirough  the  work  of  a  single  day.     This  little 
sheet  will  be  readily  comprehended  without  any  detailed  explanation : 

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THE    CASHIER.  17 i 

Here  we  have,  in  round,  outline  figures,  the  condition  of  the  bank 
at  the  beginning  of  the  morning's  business — a  brief  statement  of  its 
resources,  maturities  for  tlie  day,  tlie  amount  of  its  loan,  clearing, 
deposits,  reserve  required,  debts,  reserve  on  hand,  etc. ,  etc.  And  here, 
also,  is  a  statement  of  some  of  its  most  important  transactions  during 
the  day  covered  by  this  Uttle  sheet — a  sheet  which  is  an  actual  tran- 
script of  one  that  has  done  regular  service  in  a  large  bank.  The  bank 
which  is  represented  on  this  sheet  is  located  in  the  Clearing-House 
city  of  Boston. 

In  illustration  of  the  uses  of  the  card  it  should  be  noted  that,  by  its 
aid,  the  Cashier  can,  without  hesitation,  answer  questions  such  as  these 
— questions  which  are  constantly  being  levelled  at  him :  What  did  you 
send  in  to  clearing  ?  How  did  you  come  out  at  clearing  ?  How  does  your 
loan  stand  ?  Have  you  New  York  funds  to  sell  ?  Do  you  wish  to  buy 
New  York  funds  ?  What  is  your  loan  ?  What  your  reserve  ?  Can  you 
let  us  have  some  National  bills  ?  Do  you  want  any  small  bills  ?  How 
much  are  the  banks  owing  you  ?  What  are  your  maturities  to-day  ? 
etc.,  etc. 

THE    CIRCLING  YEAR. 

The  Cashier's  routine  duties  are  so  varied,  so  irregtdar,  and  so 
numerous,  that  any  hint  wliich  I  can  give  that  shall  aid  him  in  his 
endeavors  to  discharge  them  promptly  and  certainly  will  be  of  a  deal 
of  practical  value.     Here  is  a  suggestion: 

Let  him  have  prepared  and  kept  constantly  on  his  desk  a  little 
book  which  he  may  term  his  agenda — a  vade  mecuin  wliieh  shall  always 
be  near  hun  to  prompt  him  and  remind  him  of  matters  which  must  be 
attended  to  in  due  time.  I  have  had  prepared  for  my  own  use  such  a 
book  as  this;  and,  having  found  it  a  most  invaluable  practical  aid, 
I  will  describe  it  and  its  workings  so  that  other  Cashiers  may  ava 
themselves  of  the  plan. 

It  is  a  well-bound  httle  volume,  about  7  inches  by  6,  and  1  inch 
thick.  The  first  part  is  indexed  by  months,  and  in  each  division  of 
months  there  are  pages  enough  to  supply  lines  to  represent  each  day 
in  the  month.  At  the  end  of  the  monthly  indexed  jjortion  of  the 
voluiue  are  a  large  number  of  pages  which  are  indexed  by  subjects. 
The  indexing  is  done  in  the  ledger  index  style — that  is,  by  cutting 
notches  in  the  book. 

Now  for  the  way  the  little  agenda  book  is  to  be  kept  and  worked. 

Bear  in  mind  that  it  is  a  book  to  remind  a  Cashier  of  things  to  be 
promptly  attended  to — that  nmst  be  done  from  day  to  day ;  a  book  that 
is  to  jog  his  memory.  First  let  me  give  you  a  diagram  of  the  book — 
a  sort  of  picture  of  its  exterior  (see  Form  41  on  page  172),  and  a 
specimen  page  of  its  interior  (see  Form  42  on  page  172) — showing  first 
the  manner  of  its  indexing  and  then  a  part  of  the  record  for  March. 

Each  morning  the  Cashier  may  turn  to  the  proper  month,  and, 
glancing  down  its  page  see  what  is  to  be  attended  to ;  see  whether  there 


17? 


PRACTICAL    BANKING. 


January. 

February. 

March. 

April. 

May. 

June. 

July. 

August. 

September. 

October. 

November. 

December. 

U.  S.  Bonds. 

Int.  Cont's. 

Instructions 
&  Contracts. 

Rooms  & 
Vaults. 

Expenses. 

March. 


15 


Dividend  Book  to  bo  written  up  and  checks  ordered. 


lUnnl;sfor  Directors  for  meetings  for  examination  ami  dividend  to  be 

prepared. 
Advertisement  of  dividend  in  two  papers. 


TJeport  of  dividend  and  earning-s  to  Comptroller  Witinii  ]0  days  from 
declaration  of  dividend. 


THE    CASHIER.  173 

are  taxes  to  pay,  i-eturns  to  be  made,  collections  to  be  sent  off,  share- 
holders' meetings  to  be  advertised,  or  any  one  of  the  many  score  of 
things  which  a  bank  Cashier  has  to  have  attended  to  at  just  the  right 
time. 

In  the  after  part  of  the  book,  where  are  indexed  all  sorts  of  contracts, 
insti'uctions,  etc. ,  that  are  to  govern  him  in  his  dealings  with  liis  cor- 
respondents, he  finds  recorded  in  detail  a  great  quantity  of  matter 
which  is  invaluable,  and  which  is  so  easy  of  access  as  to  make  the 
record  a  great  comfort  to  him  in  the  administration  of  his  bank. 

A  bank  Cashier  came  to  me  in  a  distui'bed  frame  of  mind  because 
he  had  forgotten  to  advertise  his  annual  meeting  in  legal  season.  I 
could  only  tell  him  that  he  would  have  to  call  a  meeting  of  his  Directors 
and  change  the  by-law — relative  to  the  time  of  holding  such  a  meeting 
— setting  the  time  ahead  far  enough  to  permit  him  to  try  again  to  get 
in  a  legal  advertisement  of  this  annual  meeting.  If  he  had  kept  this  in 
his  Reminder  Book  he  would  have  escaped  all  this  trouble. 

I  have  known  Cashiers  to  forget  to  pay  their  bank  taxes  at  the  due 
time,  to  forget  various  due  returns  to  the  Banking  Department,  to 
forget  to  collect  Government  interest  when  it  matured — in  fact,  to 
forget  all  sorts  of  tilings  which  they  would  have  properly  attended  to 
had  they  kept  an  agenda  book  instead  of  dependmg  upon  an  over- 
worked memory. 

To  aid  in  the  preparation  of  such  a  vade  mectim  I  will  mention  in 
their  order  some  of  the  duties  which  should  be  entered. 

It  is  the  duty  of  the  Cashier  to  see  that  he  receives  all  maturing 
interest  due  the  bank  from  whatever  registered  United  States  bonds 
the  bank  may  hold,  and,  in  order  to  conduct  this  business  safely  and 
easily  should  have  upon  his  vade  mecum  an  accurate  record  of  all  these 
registered  bonds,  with  a  classified  statement  of  their  maturmg  interest. 

On  the  first  of  January,  as  well  as  on  the  first  of  many  other  months, 
the  United  States  pays  interest  upon  these  bonds. 

In  former  times  holders  of  securities  of  this  class  were  obliged  to 
call  at  the  office  of  the  United  States  Treasurer  or  of  his  Assistant 
Treasurers,  there  collect  their  maturing  interest,  and  sign  on  the 
Treasurer's  books  a  receipt  for  the  same;  but  the  payments  are  now 
almost  enthely  made  by  direct  remittances  to  the  bond-holders  of 
drafts  on  United  States  Sub-Treasurers. 

The  opening  of  the  year  is  a  good  time  in  which  to  make  a  settle- 
ment of  all  the  outstanding  bills  against  the  bank  for  incidental 
expenses,  and  it  is  well  to  have  an  entry  to  cover  that  duty. 

The  National  banks  are  required  by  law  to  hold  then-  annual  meet- 
ings for  choice  of  Directors  some  time  in  January,  the  precise  day  to 
be  fixed  by  the  articles  of  association.  A  preliminary  mention  is  also 
made  in  December. 

The  Cashier  of  a  National  bank  must  see  that  his  semi-annual  taxes 
on  the  circulation  of  his  bank  are  paid  some  time  in  the  month  of 


174  PRACTICAL    BANKING. 

January  and  July.  These  taxes  may  be  paid  into  any  National  bank 
a  Government  depository,  or  direct  to  the  United  States  Treasury. 

The  semi-annual  return  as  to  amount  of  circulation,  which  is  else- 
where described,  also  comes  early  in  January  and  July. 

The  semi-annual  diA^dends  of  many  National  banks  are  paid  April 
1st  and  October  1st.  In  banks  where  payments  are  made  at  these  dates 
the  Cashiers  find  the  last  half  of  March  and  September  well  filled  with 
special  duties  relative  to  preparations  for  the  dividends.  They  must 
see  that  the  shareholders'  di\'idend  book  is  duly  prepared,  that  the 
regular  examination  of  the  bank  which  always  precedes  the  declaration 
of  a  dividend  is  duly  attended  to,  that  a  complete  statement  of  the  net 
earnings  of  the  bank  upon  which  a  dividend  is  to  be  based  is  drawn  up, 
and,  when  the  Dhectors  have  declared  the  dividend,  must  duly  adver- 
tise it,  and  finally  report  to  the  Comptroller  the  amount  of  dividend 
and  earnings. 

Once  a  year,  generally  in  the  month  of  May,  the  Cashier  must 
return,  under  oath,  to  the  Assessors  of  the  town  or  city  in  which  liis 
bank  is  located,  a  complete  list  of  his  shareholders,  ^\'ith  the  amount 
of  shares  held  by  each  and  their  legal  place  of  residence,     j 

National  banks  now  quite  generally  assume  and  pay  the  tax  on  their 
shares ;  but  the  list  in  question  is  necessary,  so  that  the  localities  where 
their  shares  are  held  shall  be  duly  credited  for  taxes  paid  upon  them. 

The  bank  must  keep  a  record  of  the  names,  residence  and  number 
of  shares  held  by  all  its  shareholders,  and  this  record  shall  at  times  be 
subject  to  the  inspection  of  all  the  shareholders  and  creditors  of  the 
association  and  also  to  the  inspection  of  the  Tax  Assessors  in  the  locality 
where  the  bank  is  situated.  A  copy  of  this  list,  verified  by  the  oath  of 
the  Casliier,  must  be  sent  to  the  Comptroller  of  the  Currency  on  the 
first  Monday  in  July  of  each  year. 

As  the  annual  meeting,  to  be  held  in  January,  must  be  advertised 
at  least  tliirty  days  in  advance,  the  December  memorandum  should 
remind  the  Cashier  to  insert  these  advertisements  m  the  papers. 

The  Cashier  is  called  upon  not  less  than  five  times  each  year  to 
make  a  return  to  the  Comptroller  of  the  Currency,  on  forms  prescribed 
by  him,  cjf  the  condition  of  the  bank.  This  statement,  which  gives  in 
detail  all  the  resources  and  liabilities  of  the  bank,  is  called  for  at  unex- 
pected times,  and  when  called  for  must  be  at  once  made  up  and  returned 
to  the  Comptroller.  • 

The  Cashier  must  publish,  in  at  least  one  newspaper  in  the  place 
where  the  bank  is  located,  an  abstract  of  these  returns  to  the  Comp- 
troller, and  forward  to  the  Comptroller  proof  of  such  publication. 
Where  there  is  no  newspaper  in  the  town  or  city  where  the  bsmk 
transacts  business,  a  publication  of  the  abstract  in  a  newspaper  in  the 
same  county  will  answer  the  purpose. 

I  have  now  given  a  hasty  summary  of  the  yearly  round  of  the  leading 
special  duties  of  the  Cashier  of  every  National  bank,  a  list  which  shows 


THE    CASHIER.  175 

he  has  his  hands  full  of  hnportant  details  that  must  be  carefully 

attended  to.     To  discharge  the  duties  of  a  Cashier  properly  requires  a 

clear  head,  a  thorough  acquaintance  with  the  theory  and  practice  of 

banking,  unswerving  integrity,  patience  and  persistence,  and  the  most 

systematic  habits  of  business.      The  man  who  attempts  to  fill  the 

position  in  question  without  proper  qualifications  places  himself  under 

the  harrow.     He  who  is  well  equipped  for  doing  this  Cashier  work  may 

do  it  comfortably  and  creditably,  and  may  take  liis  place  on  the  harrow 

rather  than  under  it. 

LIST    OF    DEPOSITORS. 

The  Manager  of  a  large  bank,  and  one  that  has  a  long  list  of 
depositors,  to  which  names  are,  of  course,  constantly  being  added,  will 
find  it  very  convenient  to  adopt  a  memorandum  book,  which  shall  be 
a  compact  indexed  affair,  containing,  in  alphabetical  arrangement,  a 
complete  list  of  all  the  depositors  of  the  bank,  with  their  addresses, 
and  other  little  bits  of  information  about  those  not  likely  to  be  well 
remembered,  which  will  show  at  a  glance  who  they  are,  who  introduced 
them  to  the  bank,  or  any  other  points  about  them  which  shall  aid  in 
showing  ji^st  who  and  what  they  are,  in  case  of  need. 

I  have  no  need  of  presenting  a  form  for  such  a  book;  the  descrip- 
tion of  it  which  I  have  given  will  enable  any  Cashier  to  get  one  up  to 
suit  himself.  I  have  had  in  use  for  many  years  a  book  of  this  character, 
and  I  know  that  other  Cashiers  who  have  kept  such  a  record  have 
found  it  exceedingly  useful. 

A   CASHIER'S    SCRAP    BOOK. 

Fiverv  Manag-pr  of  n  hnnU-  shnnkl  h^xe  about  hiin.  on  the  shelves  of 
his  bank  and  within  iimnpdiate  reach,  a  good  banker's  reference  Ubrary. 

It  would  be  rg,ther  impracticable  for  ine  to  specify  prP!(;>ise1y  what 
books  should  enter  into  such  a  collection,  since  their  character  must 
necessarily  vary  with  circumstances  and  location.  The  large  bank  in 
the  great  city  would  be  expected  to  have  more  of  a  library  than  the 
smaller  institution  in  the  interior.  On  the  other  hand  it  might  be 
claimed  that  the  city  bank,  located  in  the  midst  of  vast  libraries  and 
Uberally  supplied  with  legal  assistance,  could  move  along  without 
manuals  and  reference  books  which  might  seem  indispensable  to  the 
country  bank. 

I  found  in  the  leading  cities  of  England  splendid  reference  Hbraries 
located  in  their  business  centres — libraries  that  could  be  quickly 
consulted  by  their  bankers  and  business  men,  and  exhaustive  in  their 
resources.     This  idea  should  be  adopted  by  some  of  our  banks. 

Without  attempting  to  mention  in  detail  what  books  a  bank  .should 
have  and  should  not  have,  it  may  be  well  to  say  that  it  needs  the  Bank 
Act,  the  laws  of  its  State,  a  good  dictionary,  atlases,  the  best  work 
extant  on  the  methods  and  machinery  of  banking,  a  judicious  selection 
of  periodical  financial  literature,  a  file  of  the  report  of  the  United 
States  Comptroller  and  Treasurer,  a  classified  list  of  names  and  loca- 


176 


PRACTICAL    BAXKIjN'G. 


tion  of  all  the  baxiks  in  the  United  States,  Avith  names  of  their  oflS^eers, 
amount  of  their  capital,  etc. ,  and  a  directory  of  the  place  of  its  own 
location,  if  such  exists. 

Beyond  this  simple  catalogue  lies  a  large  field  from  which  selections 
of  bank  reference  books  may  be  made  as  means  and  circumstances 
demand. 

I  had  particularly  in  mind,  in  opening  this  paragraph,  a  suggestion 
regarding  the  advantages  of  a  scrap-book  to  a  bank  Manager — a 
neatly  arranged  and,  if  possible,  indexed  collection  of  printed  selec- 
tions gathered  from  papers,  periodicals  and  circulars,  treating  directly 
upon  the  Cashier's  profession  and  work,  and  of  a  character  not  to  be 
obtained  elsewhere. 

The  alert  Cashier  is  often  calling  to  mind  the  fact  that  he  has  seen 
and  read  somewhere  something  relative  to  a  difficult  point  which  is 
confronting  him,  and  he  -wishes  he  could  recall  just  what  that  some- 
thing was.  This  scrap-book  might  help  to  fill  tliis  mental  gap — bridge 
this  lapse  in  memory. 

PAYING   DIVIDENDS. 

A  few  hints  relative  to  tliis  matter  may  be  of  interest  and  value. 

Here  is  a  good  form  (see  Form  43)  for  a  Dividend  Book— the  book 
■where  shareholders  sign  the  receipts  for  their  dividends.  The  headings 
and  items  on  this  fonu  are  so  clear  that  they  need  no  explanation. 


We,  the  siTbscribers,  acknowledge  to  have  received  of  the  FIRST  NATIONAX 

BANK,  of  Wellsley,  a  Dividend  of  the  sums  severally  set  against  our  respective 
names,  being  Dividend  No.  — . 


Names. 


Adams,  T. 
Brown,  Walter 
Grossman,  Jno. 
Lyon,  Robert.. 
Morse,  Richard 
Nowell,  Wm. .. 
Patterson,  Jas. 
Pinkham,  Wm. 
Sabin,  Frank .. 
Wiley,  Chas.... 


1 

Date. 

19 

57 

1889. 
Oct.  1 

30 

90 

Oct.  12 

5 

15 

Nov.  15 

15 

45 

Nov.  1 

16 

48 

Dec.  12 

12 

36 

Nov.  15 

33 

96 

Oct.  19 

25 

75 

Dec.  12 

17 

51 

Dec.  24 

20 

60 

Oct.  26 

Sigiiatiires. 


T.  Adams 

Walter  Brown 

John  Grossman 

Robert  Lyon 

James  Brown  (per  order) 

Wm.  Nowell   

Jas.  Patterson 

Wm.  Pinkham 

John  Sabin  (per  order).. 
Ghas.  Wiley 


Residence. 


Roxbury. 

Taunton. 

Washington. 

Dorchester. 

Richmoiul. 

Urbana. 

Worcester. 

Manchester. 

Boston. 

Chicago. 


Form  43. 

The  semi-annual  dividends  of  our  banks  are  usually  made  up, 
declared  and  advertised  a  week  or  two  befoi-e  they  are  made  payable; 
and  there  is,  therefore,  ample  time,  meanwhile,  to  write  into  this  book 
the  amounts  and  rate  of  the  dividend. 


THE    CASHIER.  177 

The  filling  in  of  the  names  and  the  number  of  the  shares  is  work  that 
can  bo  done  in  advance  of  the  declaration  of  the  dividend.  And  as  this 
is  plain  work,  that  should  be  done  in  a  most  neat  and  correct  manner, 
it  is  well  to  start  on  it  early,  so  as  to  take  it  comfortably  and  do  it 
properly. 

In  paying  dividends  at  the  counter  of  the  bank,  it  is,  of  course, 
impossible  for  the  Casliier,  or  his  deputies,  to  know — to  identify — all 
his  shareholders,  for  they  are  in  part  a  changing  throng,  owing  to  the 
transfers  of  shares  that  are  all  the  time  going  on. 

But  I  am  sure  that  few  have  any  idea  how  well  the  experienced  bank, 
officers  are  able  to  identify  a  large  proportion  of  the  shareholders,  and 
representatives  of  shai'eholders,  who  make  these  semi-annual  calls.  It. 
is  this  remembrance — this  identification— which  makes  the  disburse- 
ment so  easy  and  safe.  ., — 

And  here  is  a  hint  of  value :  Do  not  let  the  Dividend  Book  he  around 
too  publicly— too  free  for  the  inspection  of  any  outsider  who  may  drop 
into  the  bank.     Any  banker  will  see  the  grounds  for  this  caution. 

In  paying  out  your  dividend  checks  be  very  careful  to  give  the  right 
persons  the  right  checks ;  for  mistakes  of  this  land  cause  nmeh  bother, 
and  may  lead  to  losses. 

After  the  first  rush  of  paying  a  dividend  Ls  over  it  is  well  to  read  off 
by  the  Dividend  Book  the  checks  remaining  on  hand  to  see  that  no 
errors  have  so  far  been  made ;  for  an  early  discovery  of  any  mistakes 
of  the  character  just  named  will  render  it  much  easier  to  rectify  them. 

The  Cashier  must  see  that  his  lawful  money  reserve  is  well  up  to 
the  requirements  of  the  law  when  the  bank  makes  a  declaration  of 
a  dividend,  for  all  declarations  of  dividends  are  forbidden  when  this  is 
deficient.  Within  ten  days  after  the  declaration  of  a  dividend  he  must 
report  to  the  Comptroller  of  the  Cm-rency  the  amount  of  the  dividend 
and  net  earnings  in  excess  of  the  dividend.  This  report  must  be  attested 
by  the  oath  of  the  President  or  Cashier. 

To-day  very  many  corporations  are  mailing  all  their  dividends ;  and 
the  number  of  companies  adopting  this  mode  is  constantly  increasing. 
The  large  railroads  were  the  first  to  use  this  mailing  method  and  the 
banks  are  rapidly  following  suit  in  the  matter. 

The  custom  has  its  advantages,  and  disadvantages.  One  of  its  dis- 
advantages lies  in  the  fact  that  it  deprives  the  Cashiers  of  the  banks  of 
the  pleasure  of  once  in  six  months  seeing  the  faces  of  a  large  proportion 
of  their  shareholders. 

In  carrying  out  the  mailing  plan  permanent  orders  for  sending 
dividends  by  post  are  filed  with  the  company,  specifying  that  they 
shall  be  so  sent  until  otherwise  ordered. 

In  maihng  the  dividend  checks  a  printed  form  of  letter  may  be 
advantageously  used. 

The  following  form  (see  Form  44)  is  used  by  the  Chicago,  Bur- 
lington &  Quincy  Railroad  Company,     Probably  no  railroad  has  a 


ITS  PRACTICAL    BANKING. 

better  system  of  administering  the  details  of  its  ofBce  affairs  than  this 
company : 


Cliicag:o,  Burlington  &  Quincy  Railroad  Co. 

AS.SISTAXT   TUEANCREn-S   OFFICE. 

3Sro.    4Q     SE^^K-S     BXJXLIDIlSrG-- 


Eoston,  Decem'ber  15,  1890. 
As  requested  in  a  permanent  order  on  file  in  this  office,  I  inclose 
herein  my  Check  to  order,  on  the  Merchants'  National  Bank  of  this  city, 
for  the  amount  of  Dividend  of  Two  Dollars  ($2.00)  per  share,  payable 
this  day  on  Stock  as  of  record  November  21,  1890. 

Yours  truly, 
E.  E.  PRATT,  Assistant  Treasurer. 


N.  B.— Notice  of  any  desired  chsinge  of  address  must  be  sent  me  AT  LEAST  TEN 
DAYS  before  the  Dividend  is  payable.  E.  E.  P. 


THE    STOCK  —  ITS    OVf^NERSHIP   AND   TRANSFER.  179 


CHAPTER  XI. 

THE   STOCK— ITS   OWNERSHIP   AND   TRANSFER. 

The  National  Bank  Act  in  its  present  form  requires  that  the  shares 
of  a  National  bank  shall  always  be  of  a  par  value  of  one  hundred  dollars. 

But  Section  515J:  of  the  United  States  Revised  Statutes  provides 
that  the  shares  of  any  bank  organized  under  State  law  which  may 
become  a  National  bank  may  continue  to  be  for  the  same  amount  as 
they  were  before  the  conversipn.  This  is  the  statute  under  which,  for 
illustration,  the  Old  Boston  National  Bank,  of  Massachusetts,  has  until 
recently  kept  its  shares  at  a  par  value  of  $50  and  the  Massachusetts 
National  Bank  at  a  par  of  .^250. 

The  majority  of  the  old  State  banks  which  had,  pre\ious  to  their 
reorganization,  their  par  values  at  over  or  under  the  $100,  wliich  is  so 
universally  the  standard  value,  ranged  themselves  on  the  $100  line 
when  they  reorganized  by  sealing  up  or  down  as  their  previous  situation 
m.iglit  demand. 

The  old  State  Bank,  of  Boston,  had,  for  instance,  a  share  par  of  $60 
at  the  time  of  its  reorganization,  which  par  they  changed  to  that  of 
$100  at  the  new  start  under  the  National  law. 

It  is  so  universal  a  custom  in  this  country  to  make  corporation 
shares  of  the  par  value  of  the  round  $100  that  it  is  rather  better  for 
the  banks  to  follow  this  way  of  rating. 

Shareholders,  writers  of  financial  articles  and  of  financial  statistics, 
in  the  way  of  reports  of  dividends,  scales  of  earnings,  etc. ,  are,  by  such 
a  uniform  arrangement,  saved  much  trouble,  and  enabled  to  make 
their  tables  and  statements  much  simpler  and  clearer  for  their  readers. 

All  the  stock  of  the  bank  is  represented  by  certificates,  each  of 
which  is  filled  out  in  the  name  of  a  stockholder,  stating  that  he  is 
the  owner  of  a  certam  number  of  shares,  and  is  signed  by  the  President 
and  the  Cashier  of  the  bank.  The  form  given  (see  Form  45  on  page 
180)  is  practically  that  of  all  bank  stock  certificates. 

The  issuing  of  these  certificates,  and  their  cancellation  when  they 
have  become  void  through  transfer  of  the  shares  they  represented,  is 
a  business  demanding  the  exercise  of  the  extremest  caution  and  care, 
and  I  give  on  page  182  a  form  of  record  book  which  will  be  of  great 
help  in  systematizing  this  work. 

The  pages  of  this  form  (see  Form  46  on  page  182)  are  actual  copies 
taken  bodily  from  a  book  which  has  been  in  use  in  an  orderly  National 
bank,  the  only  change  made  being  an  insertion  of  fictitious  names  in 


180 


PRACTICAIi    BAXKIXG. 


THE    STOCK  —  ITS    OWISERSHIP    AND    TRANSFER.  181 

place  of  real  ones,  which  might  not  be  pleased  to  see  themselves  used 
publicly.  The  model  presented  is  of  so  clear  a  character  as  to  need 
little  letter-press  explanation. 

The  transfer  officer  enters  upon  the  left  side  of  this  book  every 
cancelled  certificate  at  the  time  it  is  withdrawn  by  a  transfer.  On  the 
right  he  records  a  full  description  of  every  new  certificate  issued. 

At  times,  but  probably  not  often,  in  a  large  bank  malung  many 
transfers,  the  footings  of  the  two  sides  of  this  book  will  balance. 

Generally  the  record  of  certificates  issued  will  be  less  in  amount 
than  that  of  certificates  cancelled,  for  the  reason  that  shares  have  been 
transferred  to  parties  who  are  not  ready  to  take  out  the  new  certificates. 
This  unreadiness  generally  arises  from  the  fact  that  they  are  proposing 
to  buy  more  of  the  stock,  and  prefer  to  wait  and  take  out  one  certificate 
covering  their  entire  purchase.  This  difference  in  the  two  columns  is 
carried  along  on  a  memorandum,  kept  on  a  separate  sheet,  or  on  a  page 
at  the  back  of  the  book,  wliich  memorandum  shows  what  certificates 
are  ready  to  be  made  out,  and  issued,  when  called  for  by  their  owners. 

In  using  this  book,  the  transferring  officer  takes  it,  with  every  certifi- 
cate to  be  issued,  to  the  President,  whose  signature  is  required  to  make 
the  certificate  complete ;  and,  when  the  President  affixes  his  signature 
to  a  certificate,  he  checks  it  off  on  the  record. 

The  President  does  not  sign  an  issue  until  it  has  been  previously 
signed  by  the  Cashier;  for  the  signature  of  this  latter  officer  is  his 
guarantee  that  it  is  issued  correctly  upon  transfers  that  have  been  duly 
made.  A  final  use  of  the  book  is  made  when  the  President  has  checked 
off  by  its  record  all  cancelled  certificates. 

In  issuing  certificates  of  shares  the  utmost  cai-e  must  be  taken  to 
fill  them  out  absolutely  correctly  in  every  point.  Write  the  names  of 
the  parties  to  whoiu  they  are  issued  fully,  and  never  indulge  in  initials 
in  place  of  the  first  Christian  names,  or  in  the  use  of  pet  household 
names,  where  ladies  are  the  holders,  placing,  for  instance,  Susie  for 
Susan,  Bessie  for  Ehzabeth,  etc.,  etc. 

I  do  not  think  it  best,  either,  to  insert  the  place  of  the  shareholder's 
residence  in  the  body  of  the  certificates.  Certificates  live  long.  Resi- 
dences are  often  changed. 

In  issuing  stock  certificates  to  trustees,  executors,  or  administrators 
some  description  of  the  ti-ust  or  the  names  of  the  parties  or  estates  for 
whom  executors  are  acting  should  always  be  inserted  in  the  certificate. 

For  illustration,  no  certificate  should  read  in  this  way:  "Robert 
Smith,  Trustee,  is  the  proprietor  of  ten  shares  in  this  bank;''  it  should 
read,  "Robert  Smith,  Trustee  under  the  will  of  James  Smith,  is  the 
proprietor  of  ten  shares  in  tliis  bank." 

An  executor  receiving  a  certificate  should  find  it  reading,  not  simply 
William  Robinson,  Executor,  but  William  Robinson,  Executor  of  the 
Estate  of . 

And  not  only  in  the  stock  accounts,  but  in  opening  deposit  or  other 


182 


PRACTICAL   BANKING. 


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Form  46. 


THE    STOCK — ITS  OWJfERSHIP    AND    TRANSFER.  183 

accounts  with  trustees,  executors  and  administrators,  mention  sliould 
always  be  made  of  the  parties  or  estates  thus  represented. 

In  former  times  it  was  quite  a  common  practice  to  issue  certificates 
and  to  open  accounts  without  making  tlie  supplementary  specifications 
I  have  here  recommended.  Points  made  by  recent  legal  decisions,  as 
well  as  the  knowledge  of  abuses  that  have  crept  in  imder  this  practice 
of  not  naming  the  estates  and  parties  acted  for,  have  led  to  the  very 
general  adoption  of  the  custom. 

One  of  the  abuses,  or  rather  ii-regularities,  in  vogue  in  times  when 
anybody  was  permitted  to  take  out  certificates  from  banks  or  to  open 
accounts  with  them  in  the  simple  form  of  ' '  trustee  "  without  any  state- 
ment of  the  character  of  the  trust  was  this:  Individuals  would,  for 
various  reasons,  give  in  their  names  in  the  transactions  in  question  as 
trustees  when  they  were  not  really  trustees  for  anybody  or  anytliing 
—  often  doing  this  simply  for  the  piu'pose  of  making  some  division  of 
property  of  whicli  they  were  themselves  the  owners  or  for  the  purpose 
of  concealing  the  ownership  of  money.  A  serious  complication  arising 
out  of  this  method  was  the  difficulty  of  moving  the  trust  at  the  decease 
of  the  party  who  had  thus  fictitiously  written  himself  as  serving  in  the 
capacity  of  trustee. 

In  delivering  to  the  new  holder  certificates  of  shares  it  is  always  very 
desirable  that  they  should  be  passed  over  direct  to  the  owner,  or  his 
duly  authorized  representative,  and  a  receipt  for  the  same  taken  upon 
the  margin  or  stub  of  the  stock  certificate  book.  The  next  best  course 
is  to  send  the  certificate  to  the  owner  by  express,  and  affix  the  receipt 
obtained  from  him  in  this  way  to  the  margin  named. 

Banks  have  a  justifiable  reluctance  to  send  certificates  of  shares  by 
mail,  though  they  are  often  requested  by  owners  so  to  do,  since  the  loss 
of  an  original  certificate  is  often  a  source  of  danger,  and  always  a  source 
of  a  deal  of  trouble. 

If  transmission  is  made  by  mail  only  the  registered  mail  should  be 
used ;  for,  under  the  methods  of  the  registered  system,  the  valuables 
thus  traveling  are  put  into  pouches  in  the  presence  of  witnesses,  are 
transmitted  under  specially  prepared  locks,  and  are  dehvered  to 
OAvners  in  person  on  their  signing  a  receipt  for  them.  But  it  should 
always  be  remembered,  in  considering  the  value  of  the  registered  mail 
system,  that  the  Grovernment  assumes  no  responsibility  for  carriage  of 
registered  mail  matter  beyond  the  exercise  of  due  diUgence  and  main- 
tenance of  the  stated  routine  safeguards. 

In  cancelling  the  old — the  retired — certificates  it  is  well  to  draw 
across  their  face  emphatic  ink-lines  of  cancellation  and  to  cut  from 
them  a  portion  of  their  signatures.  On  these  retired  certificates  entries 
should  be  made  showing  the  date  of  their  transfer  and  the  page  upon 
the  transfer  book  recording  it.  These  are  little  points,  but  there  is  a 
right  way  and  a  wrong  way  to  do  everything.  The  right  way  to  cancel 
a  signature  of  a  stock  certificate  by  cutting  it  is  not  to  cut  it  entirely 


184  PRACTICAL   BAXKIXG. 

out  but  to  cut  clearly  into  it,  so  that  the  voucher  shall  show  positively 
that  it  has  been  signed  even  after  the  cutting  has  been  made.  It  may 
become,  in  some  instances,  a  matter  of  no  httle  moment  to  bei  able  to 
show  that  a  given  certificate  was  once  duly  signed,  though  it  has  long 
been  withdrawn  and  cancelled. 

The  form  of  certificate  which  we  have  given  (see  Form  45  on  page 
180)  is  represented  as  cancelled,  and  with  a  stamped  record  of  its 
transfer  upon  its  face.  It  will  be  noticed  that  the  signatures  have 
been  annulled,  as  we  have  ad^^sed,  in  such  a  manner  as  to  leave  them 
in  a  condition  to  be  easily  recognized.  The  stamp  wliich  has  been 
aflB^xed  is  a  very  useful  form.     It  quite  readily  explains  itself : 

STOCK    TRANSFERRED    AND 
CERTIFICATE  CANCELLED 

Oct.   f^O,  "JO.      Transfer  4-16. 


Record  checked  by  S.  S.^  PveS. 

The  initials  standing  after  the  words  "  record  checked  by "'  are  those 
of  the  President  of  the  bank,  who,  under  the  system  of  retiring  certifi- 
cates which  we  have  recommended,  makes  a  final  supervision  of  their 
withdrawal  and  cancellation. 

TRANSFERRING   THE    STOCK. 

The  transfer  officer  must  first  of  all  have  the  old  certificate  surren- 
dered into  his  hands.  Then  comes  the  question  of  the  identity  of  the 
person  who  presents  it  for  transfer  and  who  claims  to  be  the  stoek- 
hoUler  named  in  the  certificate. 

The  mere  possession  of  a  certificate — the  simple  fact  that  a  stranger 
has  it  in  his  hand — does  not  warrant  the  transfer  officer  in  making  a 
transfer  without  an  identification  of  the  holder;  for,  in  case  it  should 
afterwards  prove  that  the  certificate  had  been  stolen  by  the  bearer, 
the  bank  making  the  transfer,  without  taking  precautions  to  require 
an  identification,  would  have  reason  to  regret  its  careless  action. 

What  may  be  termed  an  indirect  identification  may  sometimes  be 
secured  by  a  comparison  of  signatures. 

The  certificate  holder,  who  may,  perhaps,  only  represent  the  stock- 
holder through  a  power  of  attorney  executed  by  the  real  owner  of  the 
certificate,  may  refer  the  transfer  clerk  of  the  bank  to  signatures  on  its 
dividend  book  as  verification  of  his  identity,  or  the  identity  of  the 
signatures  on  his  power  of  attorney. 

But  positive  identifications  are  much  better  than  those  based  upon 
apparent  similarity  of  signatures.  And  the  greater  experience  a  bank 
officer  has  with  this  matter  of  signature-making  the  less  willing  is  he 
to  place  reliance  upon  these  corroborations  by  signatures. 

If  the  person  is  known  or  becomes  known  to  the  bank,  and  his 
papers  are  correct,  he  is  allowed  to  sign  the  form  of  transfer  on  the 
transfer  book  and  the  bank  is  then  ready  to  fill  out  and  issue  a  certifl- 


THE    STOCK  —  ITS    OWNERSHIP    AND    TRANSFER.  1S5 

cate  to  the  new  owner.  The  Stock  Ledger  will  be  iwsted  from  the 
transfer  book  and  the  record  be  thus  completed. 

We  have  so  far  supposed  a  simple  case  where  all  was  clear  and 
easily  seen  to  be  correct,  but  the  variety  of  forms  of  ownership  of 
stock  result  in  many  questions  which  have  to  be  settled  when  transfers 
are  wanted;  and  in  many  cases  transfer  clerks  feel  great  uncertainty 
whether  they  are  doing  Just  right  or  are  taking  risks  which  they  ought 
not  to  take. 

Late  decisions,  notably  that  of  Loring  vs.  Brodie  and  the  Mer- 
chants' Bank  of  Boston,  by  which  the  Merchants'  Bank  has  lost  a  large 
amount  of  money,  and  the  rulings  of  Judge  Aldrich,  in  the  case  of  the 
Headmg  Savings  Bank  vs.  The  Metropolitan  National  Bank,  of  Boston, 
have  added  to  the  confusion  of  the  situation  and  to  the  anxiety  of  the 
transfer  officers  of  corporations. 

We  will  look  at  some  of  these  questions,  and  our  statements  shall 
be  based  upon  decisions  posted  to  the  present  moment  of  writing  and 
safe  to  follow  until  some  judge  jumps  over  the  fence  and  makes  a  new 
departure  in  the  business  necessary. 

First,  the  powers  of  attorney  which  are  so  common  an  accompani- 
ment to  the  certificate. 

Be  sure,  if  possible,  that  the  power  is  not  a  forgery. 

A  bank  in  a  leading  city  not  long  ago  was  victimized  by  a  plausible 
scoundrel,  who  presented  himseli  to  the  Cashier,  holding  in  his  hands 
a  certificate  of  shares  which  he  had  stolen,  accompanied  by  a  power 
of  attorney  which  he  had  forged,  signature  of  witnesses  and  all,  and 
requested  a  transfer  which  was  unsuspectingly  made  by  one  of  the 
most  experienced  Cashiers,  whose  bank,  in  suffering  the  loss  wliich 
followed,  can  reflect  with  satisfaction  upon  the  fact  that  the  rascal 
has  since  been  transferred  to  State  prison. 

A  witness  to  a  power  is  not  a  legal  or  a  business  necessity,  but  it  is 
sometimes  a  very  satisfactory  feature.  Then,  if  the  power  is  not  one 
of  the  regular  printed  forms,  the  clerk  will  see  that  it  is  properly 
■worded  and  really  conveys  the  desired  authority.  An  exammation  of 
the  dates,  not  only  of  powers  of  attorney  but  of  probate  certificates 
and  similar  instruments,  is  always  in  order. 

I  have  known  instances  where  transfers  have  been  made  under 
documents  of  this  sort  which  had  become  valueless  by  various  kinds 
of  natural  deaths.  Powers  of  recent  date  are  generally  desirable,  and, 
in  some  instances  indispensable. 

Let  us  next  consider  the  duties  and  responsibilities  which  are  to  be 
met  when  making  transfers  of  stock  held  in  a  fiduciary  capacity,  or 
when  the  deceased  holder  is  represented  by  administrators  or  executors. 

It  is  from  errors  or  negligence  in  such  transfers  that  trouble  has 
generally  come. 

In  transferring  shares  standing  in  the  name  of  a  trustee  examine 
carefully  into  his  powers  at  the  fountain  head,  and  be  very  careful 


186  PRACTICAL   BANKING. 

that  the  trustee  does  not  leave  the  channels  to  which  he  may  have  been 
confined  by  the  instrument  -which  gives  him  his  authority.  See  that 
he  makes  no  transfer  not  in  harmony  with  the  common  law  or  statute 
law  governing  action  of  trustees;  and  every  bank  Cashier  ;<hould  be  a 
good  lawyer,  as  far  as  these  premises  are  concerned,  or  else  have  a 
good  lawyer  at  his  elbow. 

An  administrator  is  an  official  appointed  by  the  Probate  Court  and 
it  is  in  the  regular  line  of  his  duties  to  transfer  any  shares  belonging  to 
the  estate  wliich  he  is  settling.  It  is  only  necessary  for  the  corporation 
in  wliich  the  transfer  is  to  be  made  to  demand  of  the  administrator  the 
probate  certificate  of  his  appointment,  and  to  judge  whether  its  date  is 
sufficiently  recent  to  give  reasonable  assurance  that  it  has  not  since 
been  revoked.  Letters  of  administration  are  always  sufficient  evidence 
of  an  administrator's  authority  to  make  transfers. 

And  executors  stand  in  nearly  the  same  position.  Some  corporations 
take  the  ground  that  it  is  not  safe  to  allow  the  executors  to  make 
transfers  without  making  an  examination  of  the  will.  But  recent 
decisions  sustain  the  practice  of  those  transfer  agents  who  take  the 
position  that,  in  making  transfers  for  executors,  it  is  only  necessary  to 
see  the  probate  certificate  of  the  executor's  appointment. 

An  executor  always  has  the  right,  of  course,  to  sell  and  transfer 
property  to  pay  debts  of  the  estate  in  his  charge.  Where  circumstances 
render  it  improbable  that  a  sale  is  necessai-y  for  payment  of  debts  or 
legacies,  or  that  the  transfer  requested  is  a  proper  one  the  bank  would 
not  be  justified  in  allowing  it  until  it  had  consulted  the  will  or  was 
otherwise  properly  informed  as  to  the  circumstances. 

In  the  matter  of  transfers  by  guardians,  it  is  safe  to  say  that  all 
that  is  necessary  is  that  the  corporation  making  the  transfer  shall 
have  good  proof  that  the  parties  representing  themselves  as  guardians 
are  really  so.  And,  having  probate  proof  of  that  fact,  persons  deaUng 
with  them  in  good  faith  will  be  protected.  By  virtue  of  their  office, 
executors,  administrators  and  guardians  have  extensive  discretionary 
powers  in  managing  personal  property  entrusted  to  them. 

A  PROBATE  EXPERIENCE. 
I  had  been  duly  shown  the  probate  certificate,  and  the  original 
certificate  of  stock  was  surrendered.  Knowing  well  the  parties  to  the 
proposed  transfer,  I  had  no  hesitation  in  transferring  the  stock,  which 
stood  in  the  name  of  a  dead  shareliolder,  to  the  name  given  me  by  the 
executor  of  the  will  of  the  deceased  owner.  Everything  in  the  case 
seemed  clear  and  in  regular  red-tape  form.  Six  months  after,  I  was 
notified  by  the  executor  who  had  made  the  transfer  in  question  that 
everything  had  gone  wrong  in  the  matter— that  a  will  of  later  date 
than  the  one  under  which  he  had  innocently  moved  as  executor  had 
been  discovered,  probated  by  the  Court,  and  was  the  Avill  now  duly 
in  force.  The  same  executor  was  named  in  both  wills;  yet,  as  this 
executor  wrote,  the  transfer  I  had  made  was  null  and  void,  having 


THE    STOCK  —  ITS    OWNERSHIP   AND    TRANSFER.  187 

been  made  without  clue  authority.  But  in  this  case  it  fortunately 
happened  tliat  the  new  will  was  so  nearly  like  the  one  which  had  been 
incorrectly  px'obated  that  the  executor  of  the  new  testament  found  it 
perfectly  easy  to  guarantee  and  confirm  the  first  transfer.  Had  there 
been  radical  differences  in  the  two  wills  the  situation  might  have  been 
embarrassing. 

Points  of  great  interest  and  importance  are  the  outcome  of  just 
such  cases.  Common  and  statute  law  require  that  wills  sliall  be  pre- 
sented for  probate  within  a  certain  named  reasonable  time,  and  duly 
advertised  notice  is  given  to  all  concerned  to  show  reasons,  if  any 
exist,  why  the  Avills  that  are  offered  should  not  be  accepted  and  allowed 
a  probate.  When  these  forms  are  gone  throvtgh  with,  probate  allowed, 
and  certificates  of  same  granted,  the  banks  readily  proceed  to  act  under 
such  certificates.  The  allowance  of  probate  to  any  will  that  may  after- 
wards turn  up  is  a  matter  that  is  left  discretionary  with  the  Judge  of 
Probate.  It  is  not  to  be  supposed  that  the  Probate  Court  grants  papers 
on  a  second  will,  except  where  the  situation  that  might  result  from 
such  a  reopening  would  be  unembarrassing ;  for  the  neglect  to  present 
the  right — the  last — will  at  proper  time  and  place  should  embarrass  and 
entail  loss  upon  the  party  guilty  of  neglect,  and  not  upon  the  innocent. 

It  may  be  safely  stated  that  a  bank  is  justified  in  making  transfers 
under  probate  papers  that  are  of  due  form,  though  it  may  transpire,  as 
in  the  case  I  have  named,  that  the  papers  may  be  annulled  and  new 
ones  issued. 

There  is,  of  course,  no  recourse  under  such  circumstances  to  the 
Probate  Court.  It  cannot  be  sued  for  damages — or  rather,  if  sued, 
nothing  can  be  recovered  from  it. 

That  Probate  Courts  may  make  errors  is  proved  by  other  cases  as 
interesting  as  tlie  one  I  have  just  described.  Letters  of  administration 
were  in  one  case  tliat  has  come  under  my  observation  granted  upon  the 
estate  of  a  person  supposed  to  be  dead.  Under  these  letters  a  deposit 
in  a  savings  bank  was  drawn  out  and  paid  to  heirs.  The  party  thus 
administered  upon  afterwards  "turned  up"  and  demanded  his  money 
from  the  Court.  A  suit  was  the  result.  Final  verdict  against  the  bank. 
It  had  to  pay  the  deposit  to  the  living  owner,  having  recourse  only  to  the 
original  recipients  of  the  property,  who  happened  to  be  irresponsible. 

ESTATES    OF   NON-RESIDENTS. 

I  have  found  that  many  corporations  seem  to  be  entirely  unaware 
of  the  existence  of  any  legal  objections  to  the  making  of  transfers  upon 
foreign  probate  certificates,  and  have  never  hesitated  at  all  over 
transfers  of  this  character.  Others  who  are  aware  of  the  legal  objec- 
tions consider  the  usual  risks  of  such  transfers  so  slight  that  they  are 
willing  to  overlook  tliem — to  take  the  responsibihty  of  waiving  the 
irregularity. 

In  some  of  the  New  England  States,  where  the  shares  belong  to  the 
estates  of  deceased  parties  wlio  have  been  residents  of  other  States, 


188  PRACTICAL   BAXKIXG. 

transfers  can  be  regularly  made  without  taking  out  letters  of  adminis- 
tration in  the  State  where  the  bank  is  located. 

There  are  two  ways  of  procedure  to  safely  go  through  transfers  of 
this  chai-acter. 

Thus,  in  Massachusetts,  a  Statute  was  passed  on  April  22,  1880, 
providing  that  any  Probate  Court  in  that  State  might  license  a  foreign 
executor  or  administrator  to  transfer  or  sell  any  shares  in  any  corpora- 
tion in  the  county  where  the  said  Court  was  located  without  taking  out 
any  regular  probate  papers  in  Massachusetts.  This  law  provided  that 
the  license  in  question  should  be  issued  under  certain  restrictions. 
Among  them  were  these: 

1.  No  person  resident  in  Massachusetts,  interested  as  Creditor  or  likewise,  must 
object  to  the  granting  of  such  license  or  appear  to  be  prejudiced  thereby. 

2.  No  license  shall  be  granted  to  any  foreign  Executor  or  Administrator  until 
after  the  expiration  of  six  months  from  the  death  of  his  testator  or  intestate. 

3.  It  must  also  appear  that  there  is  no  Executor,  Administrator,  Trustee  or 
guardian  appointed  in  Massachusetts,  authorized  to  sell,  transfer  or  convey  or  receive 
such  shares.  See  Chapter  1'12,  Section  3,  Public  Statutes  of  Massachusetts. 

In  a  conversation  which  I  have  had  with  a  Massachusetts  Judge  of 
Probate,  relative  to  this  law,  I  have  learned  from  him  that  some 
advertising  is  necessary,  and  that  a  few  weeks'  time  is  needed  to  carry 
out  these  probate  advertising  requirements,  after  which  a  license  will 
be  issued  in  the  following  form  (see  Form  47) : 


COMMONWEALTH  OF  MASSACHUSETTS. 

County  of  Suffolk  Probate  Court,  ss.: 

I,  John  Doe,  Register  of  the  Probate  Court  in  and  for  said  County  of  Suffolk, 
hereby  certify  that,  at  a  Probate  Court  holden  at  Boston  in  and  for  said  County 
on  the  27th  day  of  May,  in  the  year  of  our  Lord  one 'thousand  eight  hundred  and 

ninety Arthur  H.    Wll ite appointed  by  the  Probate  Court  for 

the  County  of  Kennebec,  in  the  State  of  Maine,  Executor  of  the  ^vill  of 

Margaret  Oliver late  of  Waterville,  in  said  state  of  Maine, 

deceased,  and  duly  qualified  and  acting  as  such  Executor,  was  licensed  to  sell, 
transfer  and  convey— or  to  receive  or  otherwise  dispose  of— thirty  shares  of  capital 
stock  of  the  First  National  Bank,  personal  property  which  he  is  entitled  to  as  such 
executor. 

I  also  certify  that  It  appears  by  the  records  and  files  of  said  Court  that  said 
license  Is  now  In  full  force. 

In  witness  whereof  I  have  hereunto  set  my  hand  and  the  seal  of  said 

Court  this ttventjj-seventh  clay  of  May    ,       in  the 

year  of   our   Lord   one   thousand    eight   hundred  and    niltety. 

JOHN  DOE,  Register. 


Form  47. 

The  expenses  of  the  process  are  small — the  total  cost  being  not  over 
five  or  ten  dollars. 

Even  this  slight  expense,  and  short  delay,  might  be  viewed  by  some 
foreign  administrators  and  executors  as  so  objectionable  as  to  lead 
them  to  choose  the  second  way  and  furnish  a  bond  of  indemnity, 
.securing  tlie  bank  permitting  tlie  transfer  from  loss  on  account  of  the 
iiiiforjuaUty  permitted.     Such  a  bond  would  be  similar  in  form  to  that 


THE    STOCK  —  ITS    OW^^ERSHIP   A2fD   TKAKSFER.  189 

which  I  give  in  the  case  of  lost  certificates  except  in  its  recital  of  the 
differing  circumstances. 

A   TREASURER'S    TRANSFER. 

The  Kingston  Sa^dngs  Bank  held  shares  in  tlie  Eleventh  National 
Bank,  of  New  York,  which  it  had  sold  and  wished  to  transfer.  Their 
broker  in  New  York  presented  hi  in  self  at  the  Eleventh  National  Bank 
■with  the  certificates  of  the  sold  shares  and  a  power  of  attorney  signed 
by  the  Treasurer  of  the  Savings  bank,  and  duly  witnessed.  Accom- 
panying the  power  and  the  certificate  was  a  copy  of  a  vote  stating  that 
at  a  meeting  of  the  Board  of  Investment  of  the  Savings  bank  the 
Treasurer  was  authorized  to  sell  and  transfer  the  shares  in  question. 
All  these  papers  presented  calling  for  a  transfer  were  in  the  Treasurer's 
handwriting,  entirely  unsupported  by  any  other  names,  seals  or  anything 
else  of  a  substantiative  character.  The  Eleventh  National  Bank  rightly 
declined  to  make  the  tranrfer  under  these  circumstances,  saying  the 
whole  thing  savored  too  much  of  the  one-man  power  of  doing  business. 

The  things  needed  in  such  cases  are  a  duly  sealed  and  witnessed 
copy  of  a  vote  of  the  Board  of  Directors  or  Investment  Committee  of  the 
bank,  showing  the  Treasurer  has  full  authority  to  make  the  transfer. 

When  the  delegation  of  the  power  has  been  made  by  an  Investment 
Committee  the  signatures  of  a  majority  of  the  committee  should  be 
afiixed  to  their  vote  of  authorization. 

Some  bankers  take  the  ground  that  a  copy  of  Directors'  votes  or 
by-laws,  showing  the  power  of  the  Investment  Committee,  should  also 
be  furnished  the  transferring  bank.  But  it  is  more  generally  held 
that  the  power  of  sale  and  transfer  inheres  in  the  Investment  Com- 
mittees of  Boards  of  Direction. 

Where  the  authorization  to  sell  and  transfer  emanates  directly 
from  the  Board  of  Directors,  a  copy  of  the  special  or  general  vote  of 
this  authorization,  signed  by  the  clerk,  sealed  and  witnessed,  and 
accompanied  by  an  approval  of  the  President  of  the  Board,  is  the  most 
desirable  form  of  paper  that  can  be  presented  to  a  transferring  bank. 

UNSETTLED  ESTATES  AS  HOLDERS  OF  BANK  SHARES. 
There  are  some  States  where  executors,  administrators,  guardians 
and  tnistees  under  a  will  are  required,  by  statute,  to  state  and  settle 
accounts  within  a  limited  time — say  one  or  two  years.  But  this  sort 
of  statute  hmitatlon  of  the  time  of  closing  up  the  administration  of 
an  estate  is  in  this  country  the  exception  rather  than  the  rule.  As  a 
general  thing  the  matter  in  question  is  left  in  about  this  way :  As  long 
as  the  debts  are  paid,  and  all  the  legatees  choose  to  keep  the  property 
of  the  estate  undivided,  it  is  held  that  there  is  no  legal,  moral,  or 
what  may  be  termed  business,  obligation  to  close  up  the  affairs  of  the 
estate  of  a  deceased  person. 

•    Hence,  on  the  share  lists  of  many  banks  may  be  found  the  names 
of  parties  now  dead  who  have  been  shareholders.     Their  property 


190  PRACTICAL   BAXKIXG. 

has  passed  into  the  hands  of  executors  and  admmistrators,  but  these 
representatives  of  the  dead  stockholders  have  not  transferred  the 
stock  to  the  heirs  and  assigns.  There  seemed  to  be  no  particular 
necessity  for  doing  this  as  long  as  they  could  collect  dividends  and 
pass  them  over  to  the  proper  parties  and  the  bank  or  the  successors  to 
the  shares  did  not  press  them  to  make  the  transfers. 

There  are  various  reasons  why  it  is  not  well  to  move  along  in  this 
careless  and  indefinite  way ;  and  if  transfers  of  the  character  named  are 
delayed  embarrassing  circumstances  are  apt  to  arise.  Many  such  cases 
have  occurred.  The  pai'ties  whose  duty  it  is  to  administer  may  them- 
selves pass  away,  and  then  the  situation  becomes  complicated.  The 
continuance  year  after  year  of  collecting  dividends  under  admin- 
istrators' and  executors'  orders  on  the  shares  of  parties  deceased  is 
an  irregular  practice,  and  one  that  banks  should  not  permit.  This  habit 
of  delaying  the  work  of  making  the  proper  transfers  causes  difficulty 
when  the  bank  wishes  to  reach  its  individual  shareholders  for  the 
purpose  of  reorganizmg,  liquidating,  etc. 

It  may  be  set  down  as  common  law  that  an  administrator  cannot  be 
compelled  to  distribute  the  estate  left  in  his  hands  until  at  least  a  year 
has  elapsed  since  he  assumed  his  duties. 

Yet,  as  the  law  providing  for  the  settlement  of  estates  of  deceased 
persons  expects  and  demands  that  such  settlements  shall  be  attended 
to  within  a  reasonable  time,  it  follows  that  after  a  reasonable  time  for 
settlement  has  passed,  Avithout  bringing  along  any  signs  of  such  a 
culmination,  legatees  may  force  the  administrators  to  hurry  up  matters 
by  appeals  to  courts  and  judges. 

Jurisdiction  of  administration  is  vested  in  courts  of  both  general 
and  limited  jurisdiction. 

The  practical  result  of  all  this,  as  far  as  the  transfer  and  diA-ision  of 
bank  shares  belonging  to  estates  is  concerned  is,  in  a  great  majority  of 
cases,  as  follows :  Executors,  Administi'ators,  etc. ,  who  are  prompt  in 
their  business  habits,  and  who  have  a  fondness  for  closing  up  trust 
matters  just  as  soon  as  they  can  with  justice  to  all  concerned,  transfer 
and  distribute  the  bank  shares  belonging  to  the  estate  they  have  in 
hand  just  as  soon  as  they  can  judiciously  do  so.  Others,  who  are  slow 
movers,  and  who  have  to  do  with  legatees  who  are  in  no  hurry — who 
have  no  wish  for  a  division  of  the  estate — will  let  bank  shares  hang 
along  year  after  year  in  the  names  of  the  parties  deceased.  I  have 
known  instances  where  shares  thus  situated  have  remained  untrans- 
ferred  by  administrators  for  thirty  and  forty  years.  But  banks  should 
not  knowingly  permit  such  a  way  of  management;  and  Cashiers  are 
reconnnended  to  keep  a  close  watch  of  their  share  lists,  with  a  view  of 
pressing  upon  slow  executors  the  necessity  of  making  the  changes  in 
the  holding  names  of  shares  belonging  to  estates  which  they  have  been 
deputed  to  settle.  This  watchfulness  can  be  exercised  and  made 
effective  at  the  time  of  collection  of  dividends.     A  few  enquiries  and 


THE    STOCK  —  ITS  OWNERSHIP    AND    TRANSFEK.  191 

suggestions  then  made  will  often  serve  as  effectual  reminders  and  lead 
to  an  immediate  attention  to  the  matter.        • 

TRANSFERRING    SHARES    TO    DEAD    MEN. 

If  the  cases  with  wliich  the  preceeding  section  has  dealt  may  be 
termed  objectionable  what  shall  be  said  of  this  title ;  and  yet  parties 
who  are  executors  or  administrators  of  deceased  sliareholders  often 
present  themselves  at  banks  with  share  and  probate  certificates  askmg 
for  transfers  of  the  following  character:  They  have  perliaps  made 
a  sale  or  in  some  other  way  prepared  themselves  for  a  transfer  of  a 
portion  of  the  stock  upon  which  they  are  administering,  but  wish  a 
new  certificate  for  the  balance  in  the  name  of  the  deceased  holder, 
generally  for  the  purpose  of  holding  this  balance,  say,  until  they  can 
sell  the  shares  or  make  some  other  legitimate  transfer  of  them. 
Although  the  issue  of  tills  new  certificate  for  the  balance  is  not  in 
spirit  a  new  issue  of  stock,  it  has,  nevertheless,  on  its  face  this  appear- 
ance ;  and  to  make  such  an  issue  in  the  name  of  a  dead  person  is  a 
course  that  cannot  be  recommended.  The  only  proper  way  in  such  a 
case  is  for  the  representatives  of  the  estate — the  executors  or  adminis- 
trators— to  make  a  direct  transfer  of  all  the  stock,  transferring  the 
sold  shares  to  their  purchasers  and  the  remaining  shares  to  themselves 
as  executors. 

Regarding  this  last  class  of  transfers  it  should  be  remembered  that 
it  is  always  better  to  transfer  to  and  issue  certificates  in  the  name  of 

the  executors  or  administrators  than  to  transfer  to  the  estate  of , 

not  naming  the  representatives  of  the  estate.  It  is  often  questioned 
whether  a  bank  has  a  right  to  demand  that  executors  and  adminis- 
trators shall  go  tlirough  the  form  of  making  a  transfer  when  they 
surrender  old  certificates  of  a  deceased  shareholder  and  take  out  new 
ones  in  their  own  names  as  representatives  of  the  estate,  because  it  is 
claimed  that  all  that  is  necessary  in  such  cases  is  that  the  old  certificates 
shall  be  surrendered  and  a  demand  for  new  ones  made  by  the  adminis- 
trators on  the  simple  exhibition  of  probate  proof  that  they  are  tlie  legal 
representatives  of  the  deceased  shareholder.  But  it  seems  clear  that  a 
bank  should  not  cancel  old  certificates  and  issue  fresh  ones  in  a  new 
form  without  having  beliind  such  a  retirement  and  reissue  the  most 
direct  evidence  and  record  that  the  action  has  been  duly  authorized 
and  demanded.  And  what  better  form  of  proof  of  and  support  for 
such  action  can  be  furnished  than' that  supplied  by  a  formal  act  of 
transfer  upon  the  books  of  the  bank  ? 

EXTEMPORIZED  TRUSTS. 
Many  parties  are  in  the  habit  of  making  deposits  in  banks  and 
trust  companies  and  taking  out  certificates  of  share-holdings  in  their 
own  names  as  trustees  where  no  actual  trusteeship  has  any  legal  exis- 
tence. Investments  so  placed  rest  easy  enough  as  long  as  the  parties 
who  locate  them  in  this  manner  survive,  are  able  to  take  care  of  them 


193  PRACTICAL    BANKING. 

themselves,  and  do  not  -wish  to  move  them.  I  have  aheady  briefly 
referred  to  the  difficidties  which  may  result.  Let  me  illustrate  more 
fully :  Mr.  Amos  Smith  buys  a  hundred  shares  in  the  Rhodes  National 
Bank  with  his  own  money  and  for  himself.  But  he  takes  the  whim 
that  he  will  have  the  bank  transfer  it  to  himself  as  trustee — trustee 
without  any  aflSx,  or  trustee  for  some  name  which  he  presents,  the 
said  trustee-form  being  an  innocent  fiction  concocted  to  suit  his  con- 
venience. In  the  course  of  time  Mr.  Smith  passes  away,  leaving  in  the 
hands  of  his  heirs  the  certificate  in  question.  How  shall  the  bank  of 
its  issue  proceed  in  case  of  a  request  for  its  transfer?  Obliged  by 
decisions  of  law  to  require  a  sight  of  the  powers  i-esting  in  any  trustee- 
ship before  it  can  act  in  these  trustee  transfers,  it  asks  for  a  satisfactory 
proof  that  the  trustee  in  question  had  a  right  to  transfer  and  sell  -  in 
fact,  demands  to  know  what  his  precise  powers  were  under  his  trustee- 
ship. This  enquiry  is  met  by  the  response  that  no  trusteeship  actually 
existed — that  it  was  a  purely  extemporized  affair.  The  bank  in  such  a 
case  as  this  will  refuse  to  transfer  unless  under  an  indemnity  bond 
covering  all  the  risks  of  the  irregularity  of  the  demanded  transfer. 
LOST    CERTIFICATES. 

Still  another  lady  figures  in  a  lost  stock  story.  She  owned  twenty 
shares  of  stock  in  the  bank,  for  wliich  she  held  the  usual  certificate 
made  out  in  her  own  name.  She  wished  to  transfer  a  portion  of  this 
stock  for  the  purpose  of  selling  it,  but,  on  looking  for  the  certificate, 
preparatory  to  visiting  the  bank  to  make  tlie  desired  transfer,  it  could 
not  be  found,  though  a  long  and  weary  search  was  made  for  it.  She 
was  confident  that  she  had  long  ago  placed  it,  as  was  her  custom,  in 
what  she  thought  was  the  safest  place  in  the  house,  but  what  that  safe 
place  was  she  could  not  recall.  She  finally  came  to  the  bank,  bringing 
along  her  husband,  and  both  united  in  a  request  that  a  new  certificate 
be  issued  in  place  of  the  lost  one.  Banks  are  always  reluctant  to  give 
out  these  duplicates  unless  all  hope  of  finding  the  originals  has  disap- 
peared; besides,  as  explained  elsewhere,  there  are  in  such  issues 
formalities  to  be  gone  through  with  in  the  preparation  of  bonds  which 
are  very  troublesome  both  to  the  applicant  and  the  bank.  While  I 
was  hesitating  over  the  matter,  I  suggested  that  further  time  be  taken 
to  make  a  more  vigoious  search  for  the  lost  voucher,  because  I  had 
experience  with  many  cases  where  such  a  search  had  been  successful 
under  similar  circumstances.  The  lady  and  her  husband  went  away 
sorrowful;  but  they  promised  to  hunt  further.  Not  long  after  they 
returned  bearing  the  long-lost  certificate,  which  the  lady  said  had  been 
found  in  a  favorite  safe  deposit  place  of  her  own  invention— in  the 
bottom  of  a  family  trunk  under  a  false  bottom  made  by  a  newspaper. 
She  had  looked  in  the  trunk  several  times,  but  had  not  before  looked 
under  the  open  newspaper  at  the  bottom. 

The  instances  where   parties  owning  shares  lose  or  mislay  their 
certificates  are  not  very  infrequent;  and,  as  I  have  indicated,  when 


THE    STOCK— ITS    OWNERSHIP   AJfD    TRANSFER.  193 

such  unfortunates  present  themselves  to  a  bank  asking  for  an  issue  of 
a  new  certificate  to  themselves  or  for  a  transfer  of  the  stock  to  others 
to  whom  they  may  have  sold  it,  they  are  told  tiiat  if  it  is  absolutely 
impossible  for  them  to  produce  the  old  certificate  a  transfer  will  be 
granted  them  or  an  issue  of  a  new  certificate  to  themselves  will  be 
allowed  if  they  will  furnish  the  bank  with  a  satisfactory  bond  guaran- 
teeing the  bank  from  any  loss  Avhich  may  come  from  the  presentation 
of  the  original  certificate. 

Here  is  a  concise  form  (see  Form  48),  for  a  bond  of  this  character, 
being  an  exact  copy  of  one  that  has  done  actual  service  in  a  bank  in 
a  case  where  a  certificate  had  been  lost  by  fire : 


Know  ALii  men  by  these  Presents: 

That  We, G.  Alfred  Holmes, of South  Dedham, 

iu  the  County  of  Norfolk,   and  State  of  Massachusetts,  as  principal,   and 

P.  G.  Harrison., of  said  Norfolk  county,  and  State  as  aforesaid, 

are  holden,  and  stand  firmly  bound  and  obliged,  unto  the  First  National  Bank 
of  Worcester,  a  corporation  organized  under  the  laws  of  the  United  States  of 
America,  in  the  full  and  just  sum  of  One  Thousand  Dollars,  to  be  paid  unto  the 
said  First  National  Bank,  its  successors  or  assigns,  to  which  payment  well  and  truly 
to  be  made  we  bind  ourselves,  our  Heirs,  Executors,  and  Administrators  firmly 
by  these  presents. 

Sealed  with  our  Seals. 

The  condition  of  this  obligation  is  such.  That,  Whereas  on  the 

fourth  day  of  March,  A.  D.,  1890, said  bank  issued  to  said 

G.  Alfred  Holmes a  certificate  of five shares,  being 

certificate  numbered 2007, which  said  certificate  has  been  stolen,  lost, 

or  destroyed;  and,  whereas  the  said  bank  has  agreed  to  issue  a' new  certificate,  or 

certificates,  of  said  five  shares,  to  such  persons  as  the  said G.    Alfred 

Holmes shall  direct  in  place  of  that  stolen,  lost,  or  destroyed. 

Now,  therefore,  if  the  said  certificate,  number 2007, shall  be  found, 

and  in  consequence  thereof,  or  from  any  cause  therewith  connected,  the  said  bank 
shall  suffer  loss  resulting  from  the  issuing  of  said  certificates,  then  the  above 
bounden  parties  of  the  first  part  will  indemnify  and  save  harmless  the  said  bank 
from  all  loss  and  Injury  so  suffered  and  sustained. 

Commonwealth  op  Massachusetts,  Korfolk,  ss.,  April  18.  1890. 

There  personally  appeared  the  above  named G.    Alfred    HolllieS 

and P.     G.     Harrison, and    acknowledged   the    foregoing 

instrument  to  be their- free  act,  before  me. 


Form  48. 

SHAREHOLDERS    WHO    CHANGE    THEIR    NAMES. 

Shareholders  should  notify  the  bank  in  which  they  are  owners  of 

the  change  which  has  taken  place.     They  should  also  go  to  the  bank 

in  person,  or  by  attorney,  with  their  certificates  in  hand,  and  make  a 

transfer  of  their  stock  to  the  new  name  they  have  adopted. 

Such  cases  are  not  so  unusual  as  might  be  supposed,  for  changes 
in  name  to  which  I  am  referring  are  those  which  take  place  when  a 


194  PRACTICAL    BAXKIXG. 

lady  holding  shares  in  her  own  name  and  right  takes  a  new  name  by 
maiTiage.  Banks  do  not  always  promptly  detect  these  changes  in 
name,  though  they  might  generally  do  so  if  they  watched  carefully  the 
signatures  to  their  dividend  book  and  the  dividend  orders.  ^Vllen  they 
do  observe  these  changes  they  ought  to  ask  the  parties  changed  to 
bring  in  their  old  certificates,  make  a  transfer,  and  take  out  a  new 
certificate  in  the  new  name.  Transfers  of  this  sort  are  made  in  this 
way :  Mary  White  that  was — tlie  Mary  White  in  the  old  certificate — 
should  sign  and  transfer  thus,  "Mary  White  Jones,  formerly  Mary 
White,"  and  she  should  make  the  transfer  to  her  present  self,  Mary 
White  Jones,  the  bank,  as  it  makes  the  move,  assuring  itself,  of  course, 
that  the  two  names  are  of  one  and  the  same  person. 

I  have  right  in  mind  a  recent  case  which  is  of  interest  and  clearly 
exhibits  the  proper  steps  to  be  taken. 

Miss  DeUa  Morse  held  ten  shares  of  bank  stock  in  her  maiden  name, 
and  held  in  her  own  hands  the  certificate  of  the  same.  A  gentleman 
came  to  the  bank  with  this  certificate,  holding  also  a  power  of  attorney 
for  the  transfer  of  the  certificate,  signed  Delia  Morse.  Tlie  power  was 
filled  with  an  authorization  to  transfer  these  ten  shares  to  Mrs.  Deha 
M.  Brown.  Miss  Delia  Morse  had  by  marriage  become  Mrs.  Delia 
Morse  Brown,  and  so  she  wished  to  have  the  stock  placed  in  her  new 
name.  The  question  was  at  once  raised  by  the  Transfer  Clerk  of  the 
bank  as  to  whether  or  not  the  power  of  attorney  Avas  properly  signed. 
Tills  question  took  an  unusual  aspect  from  the  curious  fact  that  Mrs. 
Delia  Morse  Brown,  who  appeared  upon  the  power  of  attorney  m  her 
maiden  name,  had  been  married  but  a  few  days,  and  had  signed  the 
power  the  day  before  her  marriage.  The  bank  decided,  and  correctly, 
that  the  i^ower  could  not  be  received  by  them  in  that  shape,  and  that 
it  nmst  be  signed  "Mrs.  Delia  Morse  Brown,  formerly  Miss  Delia 
Morse."  The  delay  of  the  party  holding  the  power  to  use  it  until  the 
lady  had  changed  her  name  rendered  it  imperatively  necessary  that 
this  unused  power  should  also  have  its  signature  changed.  Wlien  it 
was  presented  there  was  no  longer  in  existence  any  such  name  as  the 
Miss  Delia  Morse  of  the  certificate,  and  the  obsolete  name  could  not  be 
recognized  by  the  bank  as  the  proper  signature  of  the  present  Uving 
owner  of  the  stock. 

It  is  so  clearly  established  that  a  married  lady  making  a  transfer  of 
stock  standing  in  her  maiden  name  must  sign  her  married  name,  add- 

mg  the  statement,  "  formerly  Miss ,"  that  no  intelligent  bankers 

hesitate  over  the  point.  In  the  case  just  quoted,  the  peculiar  fact,  that 
the  lady  who  was  transferring  to  herself  had  signed  the  power  of 
attorney  before»she  had  changed  her  name,  made  the  situation  novel 
and  somewhat  complicated. 

While  I  am  talking  of  lady  shareholders,  I  may  say  that  until  a 
comparatively  recent  date  many  of  the  laws  of  this  country  relative  to 
the  rights  and  duties  of  women  in  matters  of  banking  have  been  very 


THE    STOCK  —  ITS    OWNERSHIP    AND    TRANSFER.  195 

burdensome  to  them.  Here  is  a  single  illustration  of  this  point,  drawn 
from  Massachusetts  banking  experience,  in  the  days  when  a  married 
woman  holding  bank  shares  in  her  own  right  and  name  could  not 
transfer  them  until  she  had  first  obtained  the  approval  of  her  husband. 
She  came  to  the  transfer  desk  of  the  bank  with  her  share  certificate 
— a  certificate  of  twenty  shares  standing  in  her  own  name,  which 
was  stock  that  had  been  a  maiden  inheritance.  She  was  a  highly 
intelligent  woman,  of  the  first  respectability,  and  known  at  the  bank. 
She  asked  that  she  might  be  allowed  to  make  a  transfer  of  the  shares, 
as  she  wished  to  turn  them  into  money.  The  Transfer  Clerk  was 
obliged  to  ask  her  if  she  had  a  husband — a  question  which  seemed  an 
unwelcome  surprise  to  her.  After  politely  enquiring  why  she  was  thus 
interrogated,  and  receiving  a  full  explanation  of  the  situation,  wliich 
amounted  to  a  flat  reflusal  to  make  the  transfer  unless  the  approval  of 
the  husband  was  obtained,  the  lady  went  away  sorrowfully,  and  in  time 
returned  with  a  husband  whose  appearance  and  habits  were  such  as 
rendered  him  remarkably  unpresentable.  He  was  an  intemperate,  low, 
stupid  man,  and  a  burden  to  his  family,  yet  the  law  demanded  that  he 
should  be  brought  to  the  bank  and  give  his  approving  signature  to  the 
transfer,  though  he  and  his  signature  were  of  little  account  elsewhere. 


196  PRACTICAL   BA>'KIXG. 


CHAPTER   XII. 

THE    BANK'S    CIRCULATION. 

Every  National  bank  ought  to  keep  an  accurate  and  detailed  record 
of  all  the  new  circulating  notes  it  receives  from  the  Comptroller  of  the 
Currency — all  that  are  retired  at  Washington  as  unfit  for  circulation, 
and  all  that  have  been  redeemed  by  the  department  and  returned  to 
the  bank  as  fit  for  re-issue.  And  this  circulation  record  should  not 
only  be  kept  so  as  to  show  the  separate  and  aggregate  circulation 
transactions  which  I  have  just  mentioned,  but  it  should  also  show  at  a 
glance  the  amount  of  each  transaction  in  each  denomination  of  bills 
the  bank  has  had  outstanding,  as  well  as  those  on  hand  in  the  printing 
department  at  Washington. 

On  page  197  is  a  model  of  a  Circulation  Book  (see  Form  49)  the 
original  of  which  is  in  use  in  a  large  bank,  and  the  page  of  circuliition 
transactions  here  shown  records  actual  movements.  Tliis  form  will 
need  a  little  study ;  but,  when  examined  by  any  bank  clerk,  it  will,  I 
think,  prove  itself  to  be  useful  and  concise. 

A  current  careful  study  of  the  tables  of  issues  and  retirements  of 
bills  of  the  various  sizes  which  can  be  made  in  this  book  will  show 
readily  what  bills  circulate  the  best — are  kept  out  the  longest.  The 
manager  who  has  facts  of  this  character  well  in  hand  is  by  them  guided 
to  a  conclusion  as  to  what  proportion  of  the  different  denominations 
of  bills  at  his  command  shall  be  ordered  from  the  printer  and  scattered 
as  circulation.  Many  of  our  best  bank  managers  understand  the  value 
of  the  studies  we  have  described,  and  profit  hf  them  accordingly. 

The  mention  of  this  matter  of  keeping  out  circulation  nmst  remind 
many  a  banker  of  curious  reminiscences  relative  to  the  circulating 
business  under  the  old-time  State  system  of  banking.  In  those  State- 
bank  days  the  most  spasmodic  and  often  costly  endeavors  were  made 
to  scatter  the  small  bank  notes  far  and  wide.  Many  of  our  active 
business  men  will  well  remember  the  great  reputation  tlie  banks  of 
Hartford  had  for  vigor  and  skill  in  keeping  out  and  widely  scattering 
the  enormous  circulation  they  were  carrying  in  the  days  of  the  glory 
and  strength  of  the  Suffolk  Bank  system.  At  that  time,  bills  came 
quickly  home  by  the  way  of  the  great  New  England  central  redemp- 
tion agent  in  State  sti'eet,  if  extraordinary  shrewdness  was  not  shown 
in  scattering  them  where  they  would  do  the  issuing  bank  the  most 
good  by  keeping  out  of  the  clutches  of  the  old  Suffolk. 

Manufacturers,  hotel-keepers,  and  all  sorts  of  consumers  of  small 


THE    BANK'S    CIRCULATION. 


197 


198  PRACTICAL  BA^'KIXG. 

notes,  were  then  given  quite  long  loans,  without  interest,  upon  the 
simple  condition  that  they  should  take  pay  in  the  small  notes,  and 
agree  to  pay  them  out  only  in  small  lots  to  persons  who  would  scatter 
them  widely. 

Banks  discounting  under  such  bargains  as  these  would  often  place 
an  ear  mark  on  the  bills — a  date  and  initial,  for  instance — which  should 
serve  as  a  detective  in  the  work  of  watching  to  see  whether  or  not  the 
borrower  lived  up  to  liis  contract  in  the  matter  of  giN-ing  the  bills  a 
good  send-off  and  a  long  life.  I  remember  well  that  it  Avas  not 
infrequently  the  case  that  these  agreements  would  be  conveniently 
forgotten,  and  into  the  Suffolk,  in  a  huge,  uncut  package,  would  come 
five  or  ten  thousand  small  notes,  all  of  some  one  bank,  and  which  had 
been  loaned  upon  the  circulation  conditions  we  have  described,  only 
to  come  home  when  the  ink  Avas  scarcely  dry  upon  the  note  which  had 
been  given  for  them. 

Borrowers  who  were  detected  by  the  ear  marks  we  have  named  in 
these  failures  to  carry  out  their  contracts  were  seldom  given  an  oppor- 
tunity to  renew  them. 

I  remember  one  curious  incident  connected  with  this  business  of 
forcing  a  circulation  which  happened  during  the  year  the  war  of  the 
rebelhon  broke  out.  The  now  defunct  White  Mountain  Bank  of 
Lancaster,  N.  H.,  loaned  a  cotton  buyer  several  thousand  dollars, 
with  the  understanding  that  he  should  take  the  small  notes  of  the 
bank  to  the  far  South  and  scatter  them  in  purchases  of  cotton.  In 
accordance  with  this  agreement  the  borrower  took  himself  and  his 
White  Mountam  bills  to  the  southern  part  of  Texas,  where  both  had 
the  ill  luck  to  be  captured  by  the  rebels,  who  threw  the  speculator  into 
prison,  and,  disgusted  because  the  bills  were  State  bills  and  not  the 
ever- welcome  Greenbacks,  angrily  destroyed  upon  the  spot  the  whole 
lot  of  money. 

STOLEN    NOTES. 

Too  great  care  can  not  be  taken  by  bankers  in  the  handling  of  the 
sheets  of  their  incomplete  circulation.  Wlien  they  are  duly  signed, 
cut  and  turned  into  the  Paying-Teller's  cash,  they  Avill,  in  one  sense  of 
the  phrase,  take  care  of  themselves.  But  while  they  are  in  the  pro- 
cess of  being  turned  from  printed  sheets  into  paper  money  they  need 
very  careful  watching.  The  Cashier,  in  receiving  them  from  Wash- 
ington, should  promptly  see  that  the  sheets  are  counted,  should  imme- 
diately send  back  his  receipt  for  them,  keep  them  carefully  in  charge 
till  signed,  and,  when  signed,  at  once  cover  them  into  the  Teller's 
cash.  If  they  are  sent  out  of  the  bank  to  be  completed  with  printed 
signatures,  and  cut  and  trimmed,  an  officer  of  the  bank  should  go 
with  them  and  superintend  their  completion  and  return  to  the  bank. 

Many  unsigned  bills  have,  first  and  last,  been  lost,  stolen,  or  other- 
wise mysteriously  disappeared  at  some  stage  between  their  issue  by  the 
department  at  Washington  and  time  of  their  proposed  issue  at  the  banks. 


THE    BANK'S    CIRCULATIOX.  199 

Presidents  and  Cashiers  liave  had  these  incomplete  bills  snatched 
from  their  desks  by  thieves,  and  they  liave,  somehow,  been  spirited 
out  of  the  hands  of  common  carriers.  Being  bright  and  genuine  in 
face  and  feature,  rogues  have  "completed"  them  by  affixing  good- 
looking  signatures,  and  set  them  afloat  at  the  expense  of  honest  circu- 
lators of  paper  money;  for  these  lame  bills  travel  just  as  well  as  the 
most  sound  ones. 

REDEMPTION    OF   MUTILATED    NATIONAL.   BANK   BILLS. 

The  Treasury  Department  has  estabhshed  rules  for  the  redemption 
of  mutilated  National  bank-notes,  and  these  rules  have  from  time  to 
time  been  changed  in  many  points.  They  are  sent  in  circular  form  to 
all  the  National  banks,  and  in  this  way  have  been  constantly  kept 
before  them,  since  the  establislunent  of  the  National  banking  system. 
It  cannot  be  positively  asserted  that  these  Treasury  redemption  rules 
are  binding  on  the  banks,  but  as  a  general  thing  the  banks  have 
accepted  them  as  their  guide,  and  the  bill-holding  public  have  the 
power  to  keep  the  banks  up  to  these  rules,  since,  in  case  of  their 
refusal  to  do  as  weU  by  them  in  redeeming  mutilated  notes,  they  can 
appeal  to  the  Treasury  Redemption  Bureau  by  sending  them  to  Wash- 
ngton  for  redemption. 

Many  banks  move  along  without  any  particular  regai'd  to  Treasury 
redemption  rules.  But,  as  long  as  these  rules  are  the  only  ones  they 
are  supposed  to  be  amenable  to  in  this  matter,  they  should  be  uniformly 
accepted  and  acted  upon. 

Carelessness  on  the  part  of  the  banks  in  this  regard  grows  out  of 
the  fact  that  they  reason  that,  as  the  Government  is  to  get  all  the 
profits  from  the  lost  and  worn  out  circulation,  they  need  take  little 
interest  in  the  treatment  of  their  worn  and  mutilated  notes. 

REDEEMING  FRAGMENTS  OF  BILLS. 
The  custom  of  the  National  banks,  which  they  have  looked  upon  as 
one  fully  authorized  by  the  Banking  Department  at  Washington,  is  to 
redeem  at  full-face  value  all  fragments  of  their  notes  which  are 
accompanied  by  a  sworn  affidavit,  attested  by  the  Justice  of  the  Peace, 
that  the  missing  portions  are  destroyed.  From  the  fact  that  the 
Government  will  allow  full  value  where  the  bank  has,  in  cases  of 
mutilations  and  partial  destniction,  redeemed  at  full  value,  and 
that  the  National  banks  make  nothing  out  of  the  lost  bill  item,  the 
banks  are  not  inclined  to  be  very  cautious  in  this  matter  of  redeeming 
the  class  of  notes  referred  to.  Their  carelessness  should  not  be 
encouraged  or  approved.  The  affidavits  in  question  should  be  carefully 
scrutinized.  It  is  easy  enough  for  rogues  to  manufacture  them  for 
fraudulent  purposes  and  to  get  up  fictitious  ones,  the  fictitious  notarial 
attestations  and  seals  having  every  appearance  of  the  genuine  article. 
Before  a  bank  redeems  a  fragment  of  one  of  its  issue  which  is  presented 
accompanied  by  an  affidavit,  it  should  endeavor  to  thoroughly  satisfy 


200  PRACTICAL    BAXKIXG. 

itself  that  the  affidavit  is  genuine  and  that  the  party  making  the  same 
is  reliable. 

Since  fragments  of  bank  notes  will,  under  some  circumstances,  be 
redeemed,  it  follows  that  any  portion  of  a  bill  may  seem,  in  the  eyes  of 
some  peoples  to  be  quite  like  money  and  of  real  cash  value.  I  remem- 
ber an  amusing  illustration  of  this  point :  Our  bank  had  to  cancel,  at 
one  time,  a  large  amount  of  bills  that  were  unfit  for  circulation.  This 
was  before  the  establishment  of  the  present  method  of  Washington 
central  redemption  and  destruction.  Our  practice  then  was  to  cut 
out  the  signatures  of  the  bills.  These  we  threw  into  the  waste-paper 
baskets  by  the  quart.  Sometime  after  a  large  cutting  of  the  character 
described,  the  police  of  a  neighboring  town  came  upon  a  great  quantity 
of  the  cut-off-signatures  carefully  stacked  away  among  the  rafters  of  a 
stable,  where  they  had  evidently  been  placed  for  safe  hiding  by  some 
rogue  who  had  abstracted  them  from  the  bank  waste-paper,  thinking 
them  of  some  money  value.  The  purloiners  of  these  scraps  were  never 
discovered — were,  in  fact,  never  hunted  for— for  the  stuff  lugged  off 
was,  of  course,  of  no  value.  Yet  there  was  something  so  unsatisfactory 
in  this  idea  that  valuable  signatures — valuable  in  their  proper  places — 
were,  if  not  burned  when  cut  off,  liable  to  be  stolen  and  preserved  in 
the  way  we  have  described,  that  this  astonished  bank  afterAvards  did 
what  all  banks  should  do  under  such  circumstances — burned  all  the 
signatures  it  detached  from  its  bank  notes. 

LOST    BANK    NOTES. 

Whenever  a  National  bank  closes  iip  business  it  pays  into  the 
Treasury  of  the  United  States,  in  legal-tenders,  the  full  amt)unt  of 
money  the  United  States  has  advanced  upon  the  Government  bonds 
— advanced  in  the  shape  of  National  bank  unsigned  notes — and  the 
Treasury  then  surrenders  to  the  bank  the  United  States  bonds  deposited 
as  security  for  circulation  and  fully  assumes  all  the  responsibility  for 
the  redemption  of  the  bank's  entire  outstanding  circulation. 

In  tlie  end  the  Treasury  pockets  all  the  money  not  called  for — no 
insignificant  sum — since  the  experience  of  the  past  shows  that,  with 
banks  of  long  standing,  a  great  many  bills  fail  to  return  to  their  parents. 
Under  the  old  State  system  of  banking  this  item  of  profits  all  went 
into  the  pockets  of  the  liquidating  institution. 

But,  under  the  State  banking  system,  the  banks  had  to  pay  for  the 
manufacture  of  their  circulating  notes — the  paper,  the  engraving  and 
printing.     All  this  expense  is  now  assumed  by  the  United  States. 

The  banks  pay  the  cost  of  running  the  Redemption  Bureau,  but 
they  pay  nothing  for  the  incomplete  currency — the  unsigned  notes 
wliich  were  furnished  them  to  do  business  with  at  the  start. 

OVER-ISSUES    OF    NATIONAL    BANK    NOTES. 
There  has  been  made  public  within  the  last  ten  years  at  least  one 
instance  where   National  V)ills  printed  from  genuine  plates  have  in 


THE    BAXK'S    CIRCULATION.  201 

some  my.*teriou.s  way  been  surreptitiously  and  fraudulently  issued 
from  the  banking  department  of  the  United  States  Treasury — issued, 
of  course,  with  signatures  manufactured  to  order,  and  either  imita- 
tions of  the  autographs  which  should  have  been  attached  or  hap- 
hazard names  put  on  at  random  in  the  places  where  the  genuine 
signature  should  have  been  affixed. 

In  the  tremendous  volume  of  business  in  circulating  money  which 
has  been  transacted  under  the  National  banking  system  between  the 
Treasury  Department  and  banks  since  the  National  bank  circulation 
commenced,  footing  up  many  hundred  million  dollars,  there  may  have 
been  over-issues  from  genuine  plates  that  were  not  discovered. 

Thei*e  is  another  phase  regarding  National  bank  circulation  which 
takes  on  an  aspect  of  an  interesting  and  curious  character  when  care- 
fully considered. 

The  point  1  have  in  my  recollection  may  be  easily  illustrated  by  an 
imaginary  case. 

Suppose,  for  instance,  that  a  bank  has  outstanding  a  regularly 
authorized  and  duly  recorded  circulation  of  8500,000.  It  gives  up  this 
cu'culation  by  withdrawing  its  bonds  and  depositing  in  their  place  with 
the  United  States  Treasurer  8500, 000  in  lawrf ul  money,  which  relieves 
the  bank  from  all  further  responsibihty  to  redeem  the  notes,  and  places 
it  upon  the  United  States  Treasury  Department.  In  time  the  entire 
$500, 000  deposit  is  entirely  absorbed  in  redeeming  the  notes,  and  still 
more  bills  of  the  same  issue  come  in  for  redemption.  Such  a  develop- 
ment would  prove  one  of  two  things.  Either  fraudulently-issued  bills 
of  that  bank  have  been  redeemed  and  destroyed  or  the  notes  in  excess 
of  its  legitimate  issue  which  are  now  being  presented  are  the  counterfeits 
of  bills  issued  from  genuine  plates  and  completed  with  forged  signatures. 
If  the  bills  are  of  the  last-named  character,  and  can  clearly  be  proved 
to  be  so,  the  way  out  of  the  dilemma  is  short  and  easy — the  bills  will 
be  condemned  and  thrown  back  iipon  their  unfortunate  owners.  But, 
if  they  are  genuine  bills,  what  shall  be  done  with  them?  That  is  the 
question.  Their  presentation  after  the  redemption  fund  of  this  bank 
is  exhausted  shows  conclusively  that  fraudulent  bills  purporting  to  be 
of  that  bank  have  been  redeemed  and  desti'oyed.  This  destruction  has 
complicated  the  situation.  Of  the  8500,000  that  have  been  redeemed 
and  destroyed  some  have  been  good  and  some  bad.  But  no  traces  of 
their  existence  and  character  remain.  The  good  and  bad  have  all  been 
paid  for,  and  no  recourse  can  be  had  to  anybody. 

The  question  now  arises,  how  are  the  genuine  bills  which  remain 
outstanding  to  be  paid  for  ?  They  are  in  honest  hands  and  are  good 
notes. 

Who  is  to  pay  for  them  ? 

In  the  grand  circulation-settling  day  that  is  to  come  some  time  or 
another  it  is  to  be  trusted  that  the  Government  will  have  to  the  credit 
of  profit  and  loss  a  fund — the  outcome  of  profit  on  outstanding  bank 


202  PRACTICAL    BAXKIXG. 

notes  lost  and  destroyed — which  shall  be  large  enough  to  meet  any 
such  contingencies  as  the  one  imagined. 

THE    REDEMPTION    BUREAU. 

Tills  is  a  department  of  the  United  States  Treasury  devoted  to  the 
work  of  redeeming,  in  lawful  money,  the  notes  of  the  National  banks. 
Every  National  bank  is  required  to  keep  with  the  United  States 
Treasury  at  all  times  a  redemption  fund  equal  to  5  per  cent,  of  its 
circulation.  As  the  inflowing  redemption-seeking  notes  of  a  National 
bank  trench  upon  tills  5  per  cent,  fund  the  bank  is  notified  of  the 
deficit  and  must  make  it  up  at  once.  Any  individual  or  bank  can 
obtain  lawful  money  on  demand  at  this  Redemption  Bureau  in  exchange 
for  National  notes  if  they  present  them  in  sums  of  one  thousand  dollars 
or  any  multiple  of  that  sum. 

When  National  banks  send  to  the  Redemption  Bureau  National 
bank  bills  for  redemption  in  lawful  money  they  do  not  pay  expressage 
on  the  National  bank  bills,  but  they  do  pay  for  the  transportation  of 
the  lawful  money  sent  back  when  returns  of  this  character  are  ordered. 
They  order  returns  in  lawful  money  ■when  they  are  in  need  of  small, 
new  Treasury  notes.  When  not  in  need  of  these  they  ask  tlie  United 
States  Treasurer  to  send  in  payment  for  the  redemptions  drafts  on  the 
nearest  Sub-Treasurer,  and  in  collecting  such  drafts  are  obliged  to  take 
such  denominations  of  legal-tenders  as  the  Sub-Treasurers  see  fit  to 
give  them  — or  even  to  accept  silver  if  the  Sub-Treasurers  choose  to 
pay  in  standard  silver  dollars. 

The  Redemption  Bureau  at  Washington  is  the  old  Suffolk  Bank 
system  revised  and  improved.  (See  David  R.  Whitney's  excellent 
history  of  the  Suffolk  Bank). 

The  expenses  of  this  National  bureau  are  assessed  upon  the  National 
banks,  bearing  upon  each  in  direct  proportion  to  the  amount  of  its 
circulation  redeemed.  Bills  for  the  same  are  sent  to  the  banks  once  a 
year.  Items  of  this  bill  are  charges  for  transiiortation,  cost  of  assorting, 
salaries,  printing  and  binding,  stationery  and  contingent  expenses. 

The  redemption  story  of  a  National  bank-note,  after  it  reaches  the 
Redemption  Bureau  at  Washington,  can  be  quickly  told.  When 
received  they  are  at  once  assorted  by  the  names  of  the  issuing  banks 
— mainly  by  women — and  this  work  is  greatly  facilitated  by  the  fact 
that  in  addition  to  the  name  the  distinctive  number  of  each  bank  is 
shown  upon  the  face  of  its  notes.  After  this  assorting  the  worn 
and  mutilated  bills  which  have  become  through  hard  service  unfit  for 
circulation  are  destroyed,  and  bills  capable  of  further  circulating  service 
are  forwarded  by  express  to  the  banks  whose  name  they  bear. 

New  currency  in  sheets  is  at  once  forwarded  to  banks  to  take  the 
place  of  worn  out  notes  Avhich  have  been  redeemed  and  destroyed. 

DKSTRUCriOX   OF  NOTES. 

The  Redemption  Bureau  now  boils  the  bank-notes  whose  usefulness 
is  at  an  end  into  pulp  by  the  use  of  steam  and  huge  cylinders.     It 


THE    bank's    CIKCULATIOX.  203 

formerly  burned  them.  The  pulp  result  is  used  to  make  a  brown  paper 
which  passes  into  packing  use  in  grocers'  stores.  In  a  visit  to  the 
Rodemption  Bureau  1  was  handed  a  brick  made  from  the  bank  bill 
pulp  of  the  department — a  solid,  shapely  brick  of  a  gray  hue  containing 
the  substance  of  I  know  not  how  many  hundreds  of  thousands  of  paper 
dollars.  The  brick  now  rests  in  the  museum  of  the  Young  Mens' 
Christian  Union,  of  Boston. 

This  description  of  the  juodern  way  of  destroying  unfit-for-circulation 
bank-notes  reminds  us  of  some  old-time  experiences  with  bank  bill 
destruction  when  Are  was  used  to  end  their  career.  In  those  old  days, 
under  a  State  system  of  banking,  it  was  the  habit  of  our  banks  to  burn 
in  the  open  grates  of  their  Directors'  rooms  their  returned  worn  and 
mutilated  bills.  These  bills  were  allowed  to  accumulate  in  the  cash  of 
the  Paying-Teller  until  he  had  on  his  hands  enough  of  them  to  make  it 
an  object  to  summon  a  committee  of  the  Board  of  Directors  to  make  a 
business  of  burning  them.  At  such  burnings  a  brisk  coal  fire  was 
made  in  the  grate  named,  and  the  bills,  having  previously  been 
recorded  by  their  numbers,  marks  and  amounts  in  the  books  of  the 
bank,  were  tin-own  into  the  fire  and  consumed  in  the  presence  of  this 
burning  conmiittee.  Persons  who  have  not  had  experience  in  this  sort 
of  business  have  little  idea  of  how  difficult  and  tedious  a  thing  it  is  to 
burn  up  entirely  a  bundle  of  soiled  old  bank-notes.  On  the  occasions 
we  are  describing  a  deal  of  stirring  of  the  fire  and  the  bills  was 
necessary,  and  considerable  time  was  required  to  complete  the  destruc- 
tion. In  at  least  one  instance  bank  bills,  whole  and  partially  consumed, 
were  carried  by  a  strong  chimney  draft  out  to  the  street  where  they 
were  picked  up  by  the  astonished  news  boys  and  other  fortunate  finders 
of  the  waifs.  This  remarkable  method  of  issuing  circulation  was  after- 
wards checked  by  covering  the  throats  of  the  chimneys  with  a  wire 
netting  when  bills  were  to  be  burned  in  open  fires.  I  remember  an 
instance  where  a  New  England  bank  was  in  the  habit  of  having  its 
old  bills  burned  in  the  forge  of  a  blacksmith's  shop.  Tliis  worked  well 
enough  until  it  was  discovered  that  quantities  of  notes,  supposed  to 
have  been  consumed  in  that  shop,  appeared  again  in  circulation, 
showing  that  the  blacksmiths  who  had  assisted  in  the  work  had  by 
sleight-of-hand  abstracted  the  condemned  notes  while  burning  them. 


204  PRACTICAL    BANKING. 


CHAPTER   XIII. 

THE  MAIL  AND  THE  TELEGRAPH. 

In  bank  Book-keeping,  and  in  the  general  ^inside  clerical  and 
recording  work  of  a  bank,  while  a  legible,  fair  handwriting  seems  abso- 
lutely indispensable,  there  is  little  call  for  the  exercise  of  the  art  of 
EngUsh  composition — little  demand  for  a  talent  for  the  construction  of 
sentences  or  the  art  of  expression.  In  fact,  constant  employment  in 
the  nai'row,  routine  work  in  question  tends  rather  to  the  contraction 
than  to  the  growth  and  expansion  of  those  faculties  which  are  called 
into  use  in  rhetoxncal  composition. 

Day  after  day,  and  year  after  year,  ordinary  banking-clerk  work  is 
but  the  task  of  writing,  over  and  over  again,  a  very  limited  vocabulary 
of  words  and  phrases.  As  an  inevitable  effect,  if  such  a  result  is  not 
carefully  hedged  against  by  resolute  study  outside  the  bank,  the  bank 
clerk  is  apt  to  lose  the  power  to  express  himself  in  an  elegant,  clear  and 
concise  manner  when  general  subjects  outside  of  the  rut  in  which  he 
has  so  long  been  moving  demand  his  attention.  This  defect  in  his 
education  and  mental  discipline  is  apt  to  be  made  clearly  evident  when 
he  is  called  upon  to  give  attention  to  the  general  correspondence  of  a 
bank. 

And  in  this  sort  of  work  there  are  requisites  even  more  import- 
ant than  the  ability  to  Avrite  an  elegant  hand.  A  lack  of  directness  and 
conciseness,  general  clumsiness  of  expression,  and,  worse  than  all,  bad 
grammar  and  bad  spelling,  have  been  known  to  characterize  the  letters 
of  bank  officers  of  good  general  intelligence  who  have  done  for  years 
neat  and  faithful  clerical  work  in  various  departments  of  their  bank. 

Young  men  often  leave  high  schools  of  the  period,  from  which 
they  have  graduated  with  honor,  without  a  decent  education  in  the 
matter  of  such  a  staple  accomplishment  as  letter-writing.  And  these 
young  men  may  for  years  discharge  passably  well  the  duties  belonging 
to  most  departments  of  bank  work  without  being  called  upon  to  show 
their  ignorance  by  doing  anything  in  the  way  of  business  and  general 
correspondence. 

One  of  the  standard  rules  in  a  properly  managed  bank  is  to  answer 
just  as  promptly  as  practicable — on  the  day  of  receipt,  if  possible — all 
letters  that  demand  a  reply.  When  these  replies  are  more  than  a 
simple  acknowledgment  of  a  letter  received,  with  enclosures  as  stated, 
that  "more"  should  be  in  style  concise,  clear,  very  courteous  under 
all  circumstances,  and,  beyond  all  things,  legible  in  date,  body  and 


THE    MAIL    AND    THE    TELEGRAPH.  205 

signature,  and  in  matter  strictly  and  closely  confined  to  the  businesr  in 
hand  and  demanding  attention. 

In  the  class  of  letter-writing  we  have  in  view  there  should  not  be 
one  word  or  figure  more  or  less  than  is  positively  demanded  for  the 
clearest  presentation  of  the  matter  in  hand. 

It  is  sometimes  the  case  that  letters  of  this  purely  business  character 
which  I  am  describing  are  written  in  such  a  concise — such  a  short-hand 
and  doubly  compressed  style — as  to  be  open  to  the  charge  of  being  too 
compact,  curt  and  laconic  to  answer  the  ends  for  which  they  were 
written.  Brevity  in  business  letters  is  very  desirable ;  but  that  brevity 
which  sacrifices  clearness  and  proper  explicitness  is  as  bad,  or  worse, 
than  a  leaning  to  diflfuseness. 

Every  business  man  has,  at  one  time  or  another,  been  badgered  by 
letters  of  the  type  I  have  just  been  describing. 

Let  me  introduce  an  actual  letter  I  have  received  from  a  gentleman 
applying  for  a  bank  situation,  which  is  a  pointed  illustration  of  the  way 
business  men  often  slip  into  the  habit  of  putting  things  in  business 
correspondence  in  an  almost  amusingly  graphic  and  condensed  style : 
Here  is  the  genuine,  live,  original  letter,   proper  names  eliminated: 

THE BANK  OF ,  \ 

The  Cashr.  Chicago,  24  July,  I8S4.      f 

NaU  Bank, 

Boston. 

Dear  Si?' :  I  am  Teller  in  the ,  they  have  closed,  want  a  position,  8 

yrs  at  cash,  28  yrs.  old,  married,  very  fast  and  correct,  any  room  for  me  on  your 
staff f    Present  salary  in  Chicago  $1,000.  Yours  respectfully , 

JOHN  JONES. 

In  the  matter  of  stationery  used,  and  in  all  the  printing  and 
engraving  brought  into  requisition  in  getting  up  books,  letter-heads, 
checks,  etc. ,  the  banks  have  an  opportunity  for  the  exhibition  of  good 
taste  and  general  neatness  and  propriety  of  styles,  and  they  ought  to 
improve  it. 

In  selecting  paper  for  use  in  correspondence  they  should  choose  a 
good  article;  and,  where  printed  headings  are  called  for,  they  should 
be  well  executed.  It  is  poor  economy  for  a  bank  to  be  careless  and 
slovenly  in  this  matter.  And  the  same  remarks  apply  to  every  class  of 
stationery  equipments  called  into  service  in  a  bank.  Its  checks  and 
drafts  should,  be  of  a  neat  and  attractive  type ;  its  notices,  circulars, 
etc.,  in  service  in  the  collection  and  messengers'  departments  should 
be  executed  in  good  form,  the  most  careful  attention  being  paid  in  their 
preparation  to  the  matter  of  their  Enghsh,  their  punctuation,  and  the 
paper  and  printing  called  into  request  in  their  luake-up.  Banks  are 
looked  to  as  a  sort  of  standard  in  these  matters.  General  business 
men  expect  them  to  be  very  neat,  correct  and  appropriate  in  these  details. 

Few  things  are  a  more  accurate  test  of  the  way  the  internal  direction 
of  the  details  of  a  bank  are  carried  on  than  the  exhibition  it  makes  of 
itself  to  outsiders  in  the  direction  we  have  been  describing. 

The  use  of  postal  cards  in  banking  correspondence  is  quite  general. 


206  PRACTICAL   BAXKIXG. 

yet  there  are  banks  as  well  as  merchants  who  have  never  used  them, 
and  say  they  never  will  under  any  circumstances.  The  reduction  of 
postage  to  two  cents  for  a  letter  of  ordinary  size  has  strengthened  these 
enemies  of  the  postal  card  in  their  opposition  to  them. 

The  particular  objection  to  the  use  of  these  cards  in  banking  corres- 
pondence is  that  it  is  extremely  desirable  in  letter  writing  that  no 
words,  beyond  a  mere  acknowledgment  of  letters  received,  shall  be 
mailed  from  a  bank  without  being  put  through  the  copy-press.  In 
well-regulated  banks  the  branding  orders  are  to  have  everything  copied. 
'NVlien  postal  cards  are  in  regular  use  in  a  bank,  writing  of  all  sorts, 
and  often  words  of  no  little  importance,  are  apt  to  be  hastily  Avritten 
on  them  and  mailed  without  retention  of  any  copy  in  the  bank. 

While  I  am  on  this  subject  of  stationery  I  may  mention  an  envelope 
sent  me  for  examination  and  which  has  come  into  quite  general  use. 

I  can  remember  very  well  when  the  use  of  envelopes,  particularly 
on  important  business  letters,  was  highly  deprecated  by  the  best 
business  men,  and  many  such  were  very  slow  to  adopt  the  innovation. 
They  rightly  valued  very  highly  the  preservation  of  the  post -marks  on 
every  letter,  for  they  had  known  of  cases  where  their  loss  had  caused 
a  deal  of  difllculty,  and  where  the  post-marks  on  a  letter  would  have 
settled  very  important  points  in  the  court  room. 

It  was  often  the  habit  of  prudent  bankers,  etc.,  when  the  use  of 
letter  envelopes  began  to  be  general,  to  carefully  remove  and  preserve 
all  the  envelopes  of  the  business  letters  they  received.  Noav  such  are 
invariably  torn  at  once  from  the  letters  and  flung  into  waste  baskets. 

The  point  of  the  invention  on  this  envelope  of  which  I  speak  lies  in 
the  fact  that  it  secures  the  final  preservation  of  the  envelope  by  making 
it  a  part  (a  fixed  attachment)  of  the  letter  itself. 

The  rapid  increase  in  the  use  of  the  connnon  envelope  which  has 
sprung  up  within  the  time  of  many  a  banker  who  reads  this  volume  is  of 
curious  interest.  They  originally  came  from  Paris.  In  Europe  at  one 
time  they  were  only  used  as  an  outer  covering  for  regularly  folded  and 
sealed  letters  to  preserve  the  latter  when  they  were  sent  out  by  the 
hands  of  private  messengers  and  servants.  About  fifty  years  ago  the 
first  envelopes  used  in  Boston  were  made  for  Mr.  Allyne  Otis  by  Mr. 
N.  D.  Cotton,  a  venerable  stationer  still  livmg,  on  patterns  brought 
from  Paris.  Mr.  Cotton  got  them  up  by  hand  and  Mr.  Otis  and  his 
friends  used  them  after  the  Paris  fashion.  From  this  small  beginning 
the  envelope  has  spread  to  its  present  enormous  use  in  the  United  States. 

It  is  possible  that  the  serious  objections  to  the  present  common 
envelope  may  in  time  lead  to  its  being  thrown  aside  for  a  substitute 
that  will  not  be  open  to  objection,  or  the  envelope  system  may  go 
entirely  out  of  fashion  and  folded  and  sealed  letters  in  some  improved 
form  come  into  general  use. 

The  letter-copying  machine  should  be  in  constant  use  in  every 
active  bank.     Every  letter  sent  out  that  contains  anything  beyond  a 


THE    MAIL    AXD    THE    TELEGRAPH.  207 

simple  acknowledgment  .should  be  copied.  It  is  diflB.cult  to  overesti- 
mate the  value  of  having  such  a  complete  fac  simile  record  of  what 
has  been  sent  out  of  the  bank. 

If  one  would  understand  something  of  the  worth  of  this  copying 
system,  let  him  try  to  imagine  himself  running  a  large  bank  without 
its  aid,  calling  to  his  mind  the  anxieties  and  troubles,  losses  and  com- 
plications which  would  be  sure  to  arise  where  there  was  not  ever 
present  an  opportunity  to  turn  to  a  well  kept  letter-book  for  a  complete 
and  perfect  record  of  all  that  had  been  written  in  the  bank  and  sent 
away,  never  again  to  be  seen  by  the  writer. 

Banks  should  supply  themselves  with  the  latest  and  best  copying- 
presses,  and  adopt  the  last  improvements  in  the  way  of  applications 
to  be  used  in  running  one  of  these  presses.  I  have  not  the  space  nor 
the  wish  to  describe  what  is  the  best  kind  of  press,  or  the  best  way  of 
using  it,  since  any  good  stationer  will  show  the  reader  at  once  the 
latest  improvements  that  have  been  made  in  copying  supplies,  and 
also,  if  need  be,  show  him  how  to  use  them. 

Having  then  the  right  tools,  the  copy-book  should  be  rightly  kept. 

Every  letter  should  be  carefully,  legibly  and  neatly  copied.  Tissue 
paper  is  not  very  costly.  Every  separate  letter  should  be  given  plenty 
of  space.  There  should  be  no  crowding  or  clipping  of  signatures  or 
dates,  but  each  letter  should  stand  out  strong  and  clear ;  every  feature 
of  it,  from  date  to  signature,  conspicuous.  Letter-books  can  be  kept 
in  this  way,  for  I  have  seen  many  such. 

It  is  an  excellent  plan  to  use,  for  the  printed  portions  of  letters,  a 
copying  ink;  and  there  is  no  difficulty  in  securing  letter  blanks  so 
printed  that  every  word  of  them  can  be  clearly  transferred  into  the 
machine  copy-book. 

It  is,  of  course,  necessary,  in  order  to  keep  a  neat  and  useful  letter- 
book,  that  the  original  letters  should  be  written  jDroperly — as  far  as 
the  mechanism  of  the  business  is  concerned.  And  in  this  respect  they 
will  be  more  properly  prepared  if  the  writer  always  bears  carefully  in 
mind  the  fact  that  his  letters  are  not  only  written  to  be  read,  but 
written  for  some  under-clerk  to  copy. 

Letter-books  should  be  built  up  on  some  plain  and  simple  index 
form,  since,  without  an  index,  they  are  robbed  of  much  of  their  use- 
fulness and  convenience. 

A     RECORD     AND     ITS     USE. 

After  the  copying  comes  the  record,  and  on  page  208  is  a  form  (see 
Form  50)  of  a  book  which  answers  an  excellent  purpose  as  a  register  of 
letters  sent,  letters  received,  and  the  dates  of  their  acknowledgements 
and  issue. 

The  form  explains  itself  quite  clearly ;  but  perhaps  a  note  or  two 
regarding  it  may  not  be  out  of  place.  It  will  be  seen  that  the  entry  of 
a  letter  received  and  answered  can  often  be  supplemented  with  the 
register  of  one  sent,  and  requiring  acknowledgment,  without  re-writing 


208 


PRACTICAL    BA^KIXG. 


the  name  of  the  correspoudent.  This  is  shown  by  tlie  first  record  on 
the  form,  where  a  letter  is  received  from  the  Mercantile  National  Bank, 
and  acknowledged,  and  one  also  sent  to  same  bank,  which  must  be 
acknowledged. 

The  dashes  iu  the  place  of  figures,  opposite  the  names  and  dates  of 
letters  received,  indicate  that  these  received  letters  needed  no  answer. 

E  T  T  E    R  ^(^S  ^  RECORD 


ci/u.^.*^ 


/aX 

/cf] 


/^ 


/<S 


/cA/y 


<LJ^Ci< 


ci^jJct'a.cf.,  y,4^c/ty/ 


r 


/c-rv^ 


'7 


// 


/s\ 


// 


'7 
'7 

7  "A 


Form  50. 

If  a  bank  is  to  use  any  sort  of  a  letter  register,  one  more  simple  and 
desirable  than  this  cannot  easily  be  devised.  It  has  many  points  of 
value,  A  glance  at  this  record  will  show  what  letters  demanding  an 
acknowledgment  have  not  been  replied  to.  The  Con-esponding  Clerk 
will  keep  a  careful  watch  of  it  ;  and,  if  delinquents  appear  upon  it,  he 
will  look  them  up  at  once,  for  in  banking  correspondence  it  is  impera- 
tively necessary  that  prompt  answers  to  all  letters  of  value  sent  out 
shall  in  all  cases  be  forthcoming.  If  letters  have  been  lost,  or  have  in 
any  way  miscarried,  it  is  highly  important  that  an  early  knowledge  of 
the  fact  should  be  In  the  hands  of  the  bank,  so  that  it  may  stop  pay- 
ments, issue  duplicates,  or  institute  searches  in  that  prompt  manner 
which  due  diligence  in  the  banking  business  demands.     I  believe  in  the 


THE    MAIL    AND    THE    TELEGRAPH.  209 

system  of  requiring  acknowledgments  for  all  letters  containing  remit- 
tances of  checks,  notes  and  drafts,  as  well  as  those  containing  more 
easily  negotiable — convertible — contents,  such  as  money,  coupons,  etc. 

There  is  a  growing  custom  among  banks  of  not  demanding  answers 
to  letters  remitting  endorsed  checks  and  the  like,  but  it  is  not  a 
custom  to  be  commended ;  and  in  general  terms  I  may  safely  say  that 
it  is  the  best  plan  in  the  administration  of  a  bank  to  take  as  few  tilings 
for  granted  as  one  possibly  can,  and  it  is  always  advisable  to  receive 
from  all  connecting  quarters  square  acknowledgments  for  all  letters 
sent  as  well  as  for  all  accounts  rendered.  Banks  frequently  head 
their  accounts  current  sent  home  to  banks  having  open  accounts  with 
them  with  the  phrase  ' '  if  not  acknowledged  within  (say  30  days)  it 
wUl  be  taken  for  granted  that  this  account  is  correct."  The  use  of 
this  disclaiming  heading  is  well  enough,  for,  in  some  contingencies,  it 
may  be  of  service.  But  direct  and  positive  acknowledgments  of  all 
accounts  rendered  in  this  way  should  be  insisted  upon — should  be 
drummed  for  if  not  duly  returned.     In  this  way  lies  safety. 

And  so  in  the  matter  of  letters  with  enclosures.  EstabUsh  the  rule 
of  requiring  acknowledgments.  Do  not  rely  upon  the  long-delayed 
and  indirect  acknowledgment  that  comes  by  the  way  of  endorsed 
checks  or  is  reached  by  a  silence  that  is  taken  for  a  consent.  The 
maintenance  of  a  prompt  system  of  acknowledgments  gives  an  early 
notice  of  non-receipt  of  valuable  letters,  which  information  is  often  of 
great  importance. 

We  shall,  of  course,  live  up  to  our  principles  and  give  prompt 
answers  and  acknowledgments  ourselves. 

In  a  properly  managed  bank  all  letters  received  which  demand  a 
reply  are,  if  practicable,  answered  the  day  they  are  received.  Those 
letters  that  are  not  thus  promptly  repUed  to  are  not  the  ones  containing 
remittances,  but  are  of  a  special  character,  and  contain  enquiries  that 
may  take  some  time  to  attend  to. 

In  this  matter  of  acknowledging  letters,  and  in  the  general  business 
of  remitting  checks  in  settlement  of  collections,  some  of  the  banks  are 
getting  into  very  careless  and  unbusiness-like  ways,  to  which  attention 
should  here  be  called. 

Many  of  them  have  of  late  years  fallen  into  the  very  objectionable 
practice  of  "answering"  letters  enclosing  checks,  drafts,  etc.,  for 
collection  by  simply  thrusting  into  the  letter  received  a  draft  in  pay- 
ment, and  returning  both  to  the  sender. 

A  bank  which  receives  a  letter  ought  to  answer  it,  if  it  needs  an 
answer,  and  then  file  it  away  for  preservation.  This  is  a  simple  and 
common  business  rule,  and  should  not  be  ignored. 

I  heard  an  experienced  bank  manager  say  on  one  occasion  that  many 
banks  were  growing  so  careless  in  their  management  of  their  correspond- 
ence that  he  expected  they  would  soon  get  into  the  habit  of  simply 
flinging  checks   into   envelopes  in   making  up  returns  by  mail   for 


210 


PRACTICAL    BANKIXG. 


collections  sent  them,  and  I  have  in  fact  known  banks  to  do  just  that. 
The  practice  of  acknowledging  all  letters  containing  clieeks  has  been 
partially  abandoned  on  the  ground  that  the  endorsement  of  the  checks 
therein,  which  are  made  payable  to  the  receivers  of  the  letters,  is  a 
sufficient  acknowledgment  of  their  receipt.  But  this  can  be  the  case  only 
where  the  endorsed  checks  are  sent  back  to  the  remitter  after  cancel- 
lation and  payment,  wliich  return  is  not  a  general  rule. 

It  seems  to  me,  in  these  times  of  cheap  postage,  the  system  of 
general  acknowledgment  should  be  re%ived,  and  if  postal  cards  have 
any  place  in  a  bank's  correspondence  this  carrying  a  simple  acknowl- 
edgmont  is  certainly  the  safest  and  least  dangerous  use  for  them. 

Labor-saving  methods  in  the  correspondence  which  are  not  unbusi- 
nessUke  may  be  adopted;  thus  banks  in  the  country,  in  sending  their 
daily  remittances  by  mail,  or  in  any  way  by  letter,  to  their  correspond- 
ents in  the  Clearmg-House  cities,  have,  within  late  years,  adopted,  in 
some  cases,  the  plan  of  helping  forward  the  hard  morning  clearing 
work  of  their  city  banks  by  listing  the  checks  enclosed  m  the  letters 
in  question  in  the  following  way  (see  Form  51).  All  the  checks  enclosed 
which  are  to  go  into  the  morning  Clearing-House  settlement  are  entered 
upon  a  slip  of  the  proper  length  of  wliich  this  is  simply  the  heading : 


5==-^           Ji 

l«s^       "^  ^  o^ 

(=1     =  S 

!-=c^  W  ^  3 

J:^  S  '^  25 

P3iq  g  s  22  -S 

l=-^^£  g 

(=i=5      .s  fe  S 

i^    Is" 

CD 

r^ 

:f=c5       ^ 

o 

Form  51. 

Upon  the  letter  itself  a  record  is  only  made  of  the  gross  amount  of 
these  cheeks.  Drafts,  notes,  etc.,  which  may  be  contained  in  the  letter 
are  recorded  upon  it  separately.  This  method  greatly  helps  along  the 
Tellers,  etc.,  in  the  city  corresponding  bank,  and  is  one  which  may  be 
recommended  for  adoption  where  the  situation  is  of  the  character  I 
have  described. 

Mailing  the  letters  is  also  a  matter  demanding  care ;  and  here  comes 
in  a  secondary  use  of  our  letter  register. 

The  clerk  or  messenger  who  actually  mails  the  letters — takes  them 


THE    MAIL    AND    THE    TELEGRAPH.  211 

to  the  post-offlce — should  check  off  by  this  record  all  the  letters  in  liis 
hands  before  mailing  them. 

The  record  should  be  made  from  the  open  letter.  The  checkuig-off 
should  be  done  from  the  directed  envelope. 

If  the  mail  is  large  he  should  have  a  satchel  in  which  to  put  the 
letters. 

Before  they  are  mailed  he  must  see  that  his  superior  officers  have 
properly  sealed  and  addressed  them. 

So,  also,  in  handling  the  letters  received.  The  same  care  that  the 
Messenger  bestows  upon  the  outward  mail  shoTild  be  exercised  in  taking 
letters  from  the  post-office  and  bringing  them  to  the  bank.  He  should 
not  let  them  go  out  of  his  hands  until  they  have  been  delivered  to  the 
Cashier  or  his  proper  deputy. 

Considerable  trouble  has  grown  out  of  the  non-observance  of  these 
simple  precautions. 

After  the  letters  are  in  hand  there  are  still  right  and  wrong  ways  of 
handling  them. 

In  opening  a  batch  of  letters,  cutting  off  a  slight  section  of  the  end 
of  the  envelope  and  then  removing  the  letter  through  the  opening 
made  is  a  good  manipulating  method,  since  by  this  mode  of  handling 
the  envelope  is  preserved  entire  and  can  be  recovered  from  the  waste- 
paper  if  there  is  a  call  for  it. 

Every  person  opening  a  bank  letter  containing  checks,  notes,  drafts, 
etc. ,  should  at  once  see  that  the  letter  contains  the  number  of  pieces 
it  records,  and  should  mark  on  the  letter  the  date  of  its  receipt. 

Checking-oflf  details,  which  should  be  promptly  attended  to  in  a 
large  bank  by  the  heads  of  the  various  departments  to  which  its 
contents  belong,  is  a  matter  requiring  a  deal  of  care.  The  best  way  of 
managing  this  work  is  for  the  Casliier  who  opens  the  letters  to  permit 
them  to  pass  at  once,  with  their  entire  contents,  tlirough  the  hands  of 
the  Teller,  Collection  Clerks,  etc. ,  these  officers  taking  out  the  contents 
belonging  to  their  departments  and  placing  upon  the  letters  their 
initial  receipt  for  the  same.  The  Cashier,  or  some  of  his  deputies, 
should  afterwards  see  that  all  the  credits  enclosed  in  the  letters  have 
been  duly  entered  upon  the  books;  and,  when  the  letters  have  thus 
been  entirely  discharged,  they  should  be  promptly  acknowledged  and 
filed  away. 

The  extremest  care  and  the  best  system  are  required  in  the  work  we 
are  describing;  for,  through  openings  in  the  correspondence  depart- 
ments, losses  by  carelessness  and  dishonesty  have  often  entered  into 
banks. 

The  Casliier  in  a  bank  of  moderate  size  attended  to  his  own 
correspondence,  checkuig  off  all  credits  himself  before  he  acknowl- 
edged his  letters.  He  could  not  have  had  a  better  system.  Yet  he 
had  no  sooner  turned  his  back  upon  the  Receiving-Teller  than  that 
officer,  with  an  eraser,  altered  his  original  entries;  and  in  the  end. 


313  PRACTIC^VL    BAXKIXG. 

with  the  collusion  of  the  Book-keeper,  a  couple  of  hiuidred  thousand 
dollars  was  stolen  from  the  bank  by  these  two  rogues. 

Under  the  best  of  systems  dishonest  men  in  responsible  positions 
can  steal  and  for  a  while  escape  detection. 

REGISTERING    LETTERS. 

Under  the  registered-letter  system  of  our  mails  the  banks  are  in  the 
habit  of  registering  those  letters  which  contain  cash,  bonds,  coupons 
and  other  valuables  which  are  good  in  the  hands  of  any  holder  into 
whose  possession  they  may,  either  honestly,  or  dishonestly,  fall;  but  I 
have  noticed  in  many  cases,  where  bank  oflB^cers  are  endeavoring  to 
decide,  in  absence  of  instructions,  whether  or  not  it  is  safe  and  wise  to 
send  forward  negotiable  securities  by  registered  mail,  there  has  been 
wanting  among  them  any  positive  infonaation  of  what  the  methods 
and  machinery  of  tliis  registered  mail  business  was— what  were  the 
risks  and  responsibilities  of  the  system.  Here  is  a  concise  explanation 
of  these  last-named  points : 

Registered  mails,  in  the  leading  cities,  generally  close  twice  a  day — 
morning  and  evening.  Registered  letters  are  deUvered  by  carriers. 
First,  third  and  fourth-class  matter  can  be  registered.  First-class 
matter  must  be  sealed;  third  and  fourth-class  matter  unsealed.  No 
matter  excluded  by  law  from  the  common  maUs  can  be  registered. 
Letters  can  be  registered  to  domestic  or  foreign  countries.  The  fee,  in 
either  case,  is  ten  cents.  All  registered  letters  must  show  upon  their 
covers  the  names  of  the  senders. 

The  way  of  life  of  the  registered  letter  is  as  follows :  It  is  placed 
in  the  mail  pouch  and  its  sending  recorded,  and  witnessed,  by  two 
postal  clerks.  The  locks  of  the  pouches  are  of  a  character  more  com- 
plex— more  invulnerable — it  is  supposed  than  those  on  the  common 
mail-bag.  The  registered  mail-bag  travels  in  the  same  way  that  the 
lower-priced  common  mail-bag  travels — in  the  same  street  and  railway 
van,  and  is  under  the  same  supervision  as  the  unregistered — no  more 
and  no  less.  A  receipt  for  every  registered  letter  is  sent  by  the  post- 
master at  its  place  of  destination  to  the  postmaster  sending  it  out. 
Every  person  receiving  a  registered  letter  signs  a  receipt  for  it,  which 
is  returned  to  the  sender. 

The  Post  Office  Department  assumes  no  special  responsibility  for 
the  carriage  of  the  registered  letter.  No  recourse  to  the  Government 
can  be  had  for  the  value  of  lost  registered  letters  unless  the  loser  can 
prove  that  tlie  post-office  has  lost  the  letter  through  carelessly  violating 
its  own  published  regulations  regarding  the  manipulations  of  registered 
letters,  which  last  thing  it  would  often  be  difficult  for  the  individual 
sulfcrer  to  do. 

With  these  extra-valuable,  or  extra-hazardous,  letters  the  alterna- 
tive would  probably  be  to  send  by  express,  which  is,  of  course,  much 
more  expensive. 

It  is  an  excellent  plan  to  have  a  bank  rule  that  securities  that  are 


THE    MAIL    AXD    THE    TELEGRAPH.  213 

to  be  sent  away  for  collection,  and  which  belong  to  depositors,  shall  be 

accompanied  by  instructions  from  their  owners,  when  they  are  taken 

on  for  collection,  as  to  whether  they  shall  be  sent  forward  for  collection 

by  express  or  registered  mail.     The  receipt  of  such  definite  instructions 

relieves  the  bank  of  responsibility  and,  in  some  instances,  of  expense. 

There  is  another  pomt   worth  alluding  to.     If  it  is  a  good  plan  to 

register  letters  of  the  class  we  have  mentioned,  why  is  it  not  well  to 

go  further  and  register  the  bulk  of  the  valuable  letters  which  a  bank 

mails?    For  instance,  why  should  not  the  interior  bank,  which  daily 

sends  to  its  corresponding  bank  in  New  York  a  letter  containing,  it 

may  be,  bank  checks  to  the  amount   of  hundreds  of  thousands  of 

dollars,  register  such  letters?    To  be  sure,  these  remitted  checks  are 

payable  to  order,  and  therefore  not  good  in  the  hands  of  the  wrong 

holder  and  not  available  in  dishonest  hands  unless  forgery  is  resorted 

to.     At  the  same  time  a  loss  of  one  of  these  valuable  letters,  full  of 

negotiable   checks  and  drafts,  would  cause   an  immense  amount  of 

annoyance  and  trouble  to  the  losing  bank;  and,  if  registering  them 

would  ensure  their  more  prompt  and  safe  transmission,  why  not  have 

it  done  ? 

TELEGRAPHIC    CORRESPONDENCE. 

In  practical  every-day  banking  a  combination  of  the  mail  and  the 
wire  is  in  frequent  request,  and  often  works  most  admh-ably.  The 
experienced  banker  is  quick  to  discern  where  these  two  agencies  may 
be  brought  together  to  work  towards  a  desired  end,  and  can,  by  the 
exercise  of  judgment  and  skill,  often  do  better  ser\ice  with  this  double 
team  than  with  either  of  them  taken  separately.  Instances  illustrating 
this  point  must  readily  come  to  the  mind  of  any  banker  who  reads 
these  pages. 

I  find,  for  instance,  that  I,  in  Boston,  have  in  New  York  a  balance 
of  §100,000,  and  it  is  exceedingly  desirable  that  it  should  be  brought 
home  to  me  at  the  earliest  possible  moment.  I  wire  to  New  York  at 
2  o'clock  to-day  to  remit,  and  when  I  reach  my  desk  at  10  o'clock  to- 
morrow morning  I  find  the  mail  has  brought  me  the  6100.000  in  Boston 
checks  or  the  express  the  same  amount  in  gold  or  currency. 

I  have  a  collection  note  due  in  New  York  to-morrow  about  whose 
fate  I  am  anxious.  I  write  to  New  York  to-day  to  wire  me  to-morrow 
adWce  of  its  payment  or  non-payment,  and  to-morrow  I  receive  the 
due  telegram. 

And  so  I  might  go  on  giving  specimens  of  the  endless  variety  of 
ways  in  which  banks  are  wiring  for  answers  by  mail  and  mailing  for 
answers  by  wire. 

But  let  us  first  note  a  few  practical  points.  Accuracy  to  the  very 
letter  in  telegraphing  is  something  that  cannot  be  assured  in  practical 
telegraphy.  Both  in  domestic  and  under-the-ocean-wiring  occasional 
lapses  in  letters  and  parts  of  words  are  inevitable.  A  long  practical 
working  experience  in  this  business  has  convinced  me  of  this  fact,  and 


214  PRACTICAI/   BANKING. 

the  most  experienced  managers  of  Avires  have  also  testified  to  the 
correctness  of  this  statement.  In  acting  upon  and  working  under 
telegrams  relative  to  payments  of  money,  bankers  are  expected  to  use 
good  judgment  and  common  sense  in  translating — making  out — the 
despatches  they  receive,  and  often  find  it  wise  to  overlook  slight 
features  of  incoherence  where  the  meaning  is  evidently  clear  and  the 
variation  in  names  only  natural  and  unimportant.  Cable  wire  work 
is  apt  to  be  more  inaccurate  than  that  on  short  overland  lines.  Where 
business  of  importance  hangs  by  the  wires,  no  undue  regard  to 
economy  of  words  should  be  allowed  to  mihtate  against  the  clearness 
and  precision  of  telegrams. 

It  seems  to  me  that  in  the  matter  of  financial  correspondence  by 
wire  our  bankers  and  brokers  are  apt  to  fall  into  the  habit  of  clipping 
and  condensing  too  much. 

Telegraphing  has  so  far  been  an  expensive  business  in  this  country 
as  compared  with  telegraphing  in  Europe.  In  London  I  found  I  crmld, 
by  postal  telegraph,  send  twenty  words  to  any  part  of  the  Kingdom  for 
a  shilling.  The  high  rate  of  our  lines  have  taught  patrons  an  economy 
in  words  which  has  sometimes  been  used  at  the  expense  of  intelligibility, 
and  the  use  of  cipher  codes  and  coined  Avords  in  telegraphy  has  en- 
croached upon  the  profits  of  the  wire  lines  to  such  an  extent  that 
some  of  them  have  had  in  srrious  consideration  plans  for  prohibiting 
their  patrons  from  using  these  short-hand  methods  of  telegraphic 
letter- writing.  And  in  one  instance,  at  least,  a  Una  having  a  monopoly 
of  business  in  its  region  has  absolutely  refused  to  receive  for  trans- 
mission all  messages  not  made  up  in  plain  words — straight  English. 

In  cable  work  there  has  always  been  the  most  extreme  economy  of 
words  in  making  up  codes  for  financial  and  general  market  reports.  I 
have  observed  many  instances  where  a  single  word  has  been  made  to 
do  cable  duty  for  a  very  minute  report  of  condition  of  a  foreign  market 
for  money,  stocks  or  merchandise. 

Signatures  to  cablegrams  are  charged  a  word  tariff.  To  avoid  even 
a  signature  expense,  knowing  patrons  of  the  cable  send  their  corres- 
pondents unsigned  messages.  A  signature  in  such  a  case  can  often  be 
omitted  just  as  well  as  not,  for  the  character  of  the  telegram  reveals 
to  the  correspondent  its  authorship. 

To  constant  and  regular  users  of  the  cable  there  is  an  evident  and 
pressing  demand  for  an  improvement  which  every  day  becomes  more 
imperativo.  This  is  the  demand  for  an  international — world-wide — 
miiformity  of  currency  and  language.  The  world  of  trade  and  com- 
merce which  is  daily  becoming  more  and  more  closely  knit  together 
by  the  agency  of  steam,  electricity,  etc.,  must  in  time  become  even 
more  homogeneous  by  the  adoption  of  a  common  language. 

All  persons  having  anything  to  do  with  telegrams  should  remember 
that  promptness  in  handling  tlicui — particularly  in  answering  them — 
is  of    the   first   importance.     The    very   word    despatch,    which   has 


THE    MAIL    AND    THE    TELEGRAPH.  215 

become  synonymous  with  telegram,  indicates  the  imperativeness 
which  characterizes  messages  of  this  character. 

In  banking,  tliese  letters  by  wire  have  a  peculiarly  strong  claim, 
for  celerity  of  movement  on  the  part  of  all  parties.  Any  banker  of 
experience  can  recall  instances  where  delays  in  attending  to  messages 
by  wire  have  sent  notes  to  protest  that  would  otherwise  have  been 
saved  from  dishonor,  allowed  insurance  policies  to  lapse,  perishable 
consignments  of  merchandise  to  be  ruined,  and  financial  embarrass- 
ments and  distress  to  be  precipitated. 

All  telegrams  sent  out  by  a  bank  should  be  carefully  copied  in 
letter  press,  the  same  as  its  regular  letters.  It  is  even  more  important, 
in  some  respects,  that  these  "grams"  should  be  copied  than  the 
mailed  letters,  since  the  most  important  of  them  are  often  written  and 
despatched  in  a  haste  which  renders  errors  easy. 

It  is  the  duty  of  the  Cashier  of  a  bank  to  receive,  open  and 
answer  its  telegrams.  Yet  matters  should  be  arranged  in  every  bank 
to  have  some  person  present,  if  the  Cashier  is  absent,  to  open  and 
reply  to  despatches  at  once.  When  a  bank  is  nominally  closed  and 
in  the  hands,  possibly,  of  junior  officers,  they  should  be  carefully 
instructed  to  open  telegrams  addressed  to  the  bank,  and  see  that 
answers  are  sent  if  such  are  imperative.  In  the  case  of  very  important 
telegrams  it  may  be  necessary  for  subordinates  to  take  vigorous 
measures  to  get  them  into  the  hands  of  Presidents  or  Cashiers  who 
have  left  the  bank  for  the  day. 

The  bank  was  sending  a  very  important  despatch  to  a  distant  point. 
It  was  extremely  desirable  that  the  telegram  should  be  made  abso- 
lutely accurate  even  to  the  smallest  word.  In  writing  this  message 
upon  one  of  the  common  blanks  of  the  telegraph  Ime  the  Corresponding 
Clerk  called  the  attention  of  the  Cashier  to  the  mass  of  rules  a,nd 
disclaimers  printed  upon  the  margin  of  the  paper,  and  asked  if  it 
would  not  be  well  in  this  instance  to  have  the  dispatch  repeated. 

Without  doubt  there  are  many  bankers  constantly  using  telegraph 
blanks  who  never  carefully  read  and  weigh  their  marginal  notices. 
But  there  is  always  to  be  found  upon  them  the  old  provision  that  the 
telegraph  company  assumes  no  responsibility  where  a  message  is  not 
repeated,  and  the  enquiry  of  the  clerk  brought  up  the  point  of  its 
present  binding  force. 

This  repeating  disclaimer,  as  well  as  many  other  notices  upon 
telegraph  blanks,  has  been  overthrown  by  the  Courts.  In  the  early 
days  of  telegraphy,  when  the  whole  business  was  a  new  science,  there 
was  reason  in  a  provision  that  repetition  of  a  message  must  be 
demanded  where  responsibility  was  to  be  assumed,  but  at  the  present 
time,  when  wiring  is  one  of  the  exact  sciences,  the  telegraph  company 
which  undertakes  to  transact  business  must  have  operators  and 
methods  and  machinery  which  will  do  the  wiring  work  of  the  public 
with  a  reasonable  degree  of  accuracy  without  the  employment  of  such 


21G  PRACTICAIi    BANKING. 

old-fashioned  means  as  repeating  a  message.  The  Courts  require  the 
companies  to  be  exact  in  the  transmission  of  messages,  and,  as  far  as 
the  sender  is  concerned,  will  not  make  hhu  repeat  his  message  in  order 
to  hold  them  responsible  for  its  proper  transmission. 

My  own  experience  has  been  that  if  a  message  comes  through  in  a 
faulty  form,  or  upon  my  simple  statement  that  tliis  or  that  word 
cannot  be  what  the  sender  intended,  the  company  has  very  willingly 
secured  a  repetition  from  the  sending  office  without  any  expense  to 
either  of  the  parties. 

Here  is  another  point  of  a  character  which  is  undoubtedly  quite 
common  in  the  every-day  life  of  banking  that  might  be  illustrated  by 
an  incident : 

The  bank  held  a  lot  of  bonds  of  the  issue  of  a  Western  township, 
which  it  had  been  endeavoring  to  sell  tlarough  a  banker  located  near 
the  place  of  issue  of  the  bonds.  Failing  to  make  the  negotiation  in 
question,  it  sold  them  near  home,  and  that  ended  the  matter.  Some 
time  after  this  closing  out  it  received  from  some  unknown  party  in  the 
West,  who  had  probably  heard  of  the  offer  of  the  bonds  at  the  time  the 
bank  was  endeavoring  to  sell  them,  a  long  and  minute  telegram, 
making  many  inquiries  about  their  character  and  the  terms  upon  which 
they  would  be  sold.  This  telegram  was  unpaid.  It  was  of  no  value  to 
the  bank  receiving  it,  for,  as  we  have  said,  the  bonds  had  been  closed 
out,  and,  being  sent  to  the  bank  by  a  stranger  about  his  own  business, 
he  should  have  paid  it.  Now,  what  are  the  rights  of  a  bank  under  the 
circum.stances,  and  its  only  correct  course  ?  The  bank  has  a  right  to 
receive  and  read  any  despatch  handed  to  it,  and  would  not  find  it  safe 
to  do  otlierwise,  yet  it  is  not  obliged  to  pay  for  any  unpaid  despatch 
unless  it  pleases  so  to  do,  pro\'ided  it  returns  the  same  to  the  Messenger 
bringing  it,  saying  it  is  of  no  value  or  importance  to  the  bank  and 
that  it  declines  to  receive  and  pay  for  it.  In  such  a  case  the  telegram 
Is  returned  to  the  point  fi*om  which  it  has  been  sent,  with  orders  to 
collect  the  cost  of  the  -wiring  from  the  sender. 

Our  telegi'aph  companies,  which  readily  concede  to  all  receivers  the 
right  to  refuse  despatches  in  tlie  manner  and  for  the  reasons  we  have 
named,  hedge  against  the  complication  and  the  possibility  of  loss  for 
work  done  in  good  faith  by  making  it  a  rigid  rule  never  to  receive  and 
forward  an  unpaid  despatch  for  an  unknown  or  irresponsible  sender. 
The  '"co/Zeci"  messages  are  always  taken  with  the  understanding  that 
the  sender  must  jmy  for  them  if  the  sendee  refuses  to  do  so. 

It  is  important  to  remark  here  that  in  the  coui-se  of  business  it  will 
hardly  be  safe  for  bank  managers  to  authorize  subordinates  to  refuse 
to  receive  unpaid  telegrams  which  reach  the  bank  out  of  bank  hours 
when  the  managers  are  absent  on  any  suspicion  that  the  bank  ought 
not  to  pay  for  them.  Very  little  discretion  nnist  be  authorized  in  this 
matter.  The  amount  to  be  paid  is  generally  small  and  the  responsi- 
bility of  refusal  is  large.     The  clerks  had  better  take  and  pay  for  them 


THE    MAIL    AND    THE    TELEGRAPH.  217 

and  run  the  risk  of  their  being  valueless  despatches  which  should  not 
have  been  sent  unpaid. 

CERTIFYING  BY  WIRE. 

The  bank  received  a  despatch  asking  if  Robert  Livingston's  check 
■was  good  for  §3,000,  and  to  answer  at  once  by  wire.  The  situation  of 
the  sender  presumably  was  that  he  stood  waiting  to  take  that  $3,000 
check  from  Li\angston  in  payment  for  values  he  was  giving  tap  to  him. 

How  shall  the  bank  upon  whom  this  check  and  message  are  drawn 
use  the  wires  in  this  case  ?  Its  answer  must  be  framed  with  care. 
The  simple  word  "yes"  and  nothing  more  was  sent  in  reply.  It 
would,  as  it  turned  out,  have  been  much  better  to  have  sent  a  more 
guarded  answer. 

Trouble  came  in  the  following  manner:  Before  the  $3,000  check 
reached  the  bank  for  collection  the  cash  which  made  it  "good  "  when 
the  telegram  was  replied  to  had  disappeared — had  been  paid  out  on 
other  checks  of  Mr.  Livingston's — and  Mr.  Livingston  had  failed.  The 
bank  was  at  once  sued  by  the  holder  of  the  $3, 000  check  on  the  ground 
that  the  "yes"  dispatch  was  a  bona  fide  certification,  and  that  the 
bank,  having  said  the  check  was  "good,"  could  be  squarely  held  for 
its  amount.  The  Court  held  to  the  contrary,  deciding  that  when  the 
bank  said  it  was  "good"  it  meant  only  that  it  was  "good"  then, 
making  no  promise  to  set  aside  its  amount  to  meet  the  check  whenever 
it  should  come  around,  and  giving  no  guarantee  that  it  should  be 
"good "  at  any  future  time.  This  decision  is,  of  course,  in  accordance 
with  common  sense  and  equity,  yet  the  style  of  telegraphic  reply  to  the 
enquiry  is  not  one  that  can  be  recommended.  In  the  case  referred  to 
it  entailed  upon  the  sender  an  expensive  lawsuit  and  a  narrow  escape 
from  final  loss.  The  bank  should  stand  upon  the  rule  that  a  check 
must  never  be  certified  until  it  is  actually  presented  and  charged,  and 
the  better  plan  would  be  to  reply  ' '  good  at  the  present  time  "or  "  the 
drawer  has  that  amount  to  his  credit  now,"  or  in  some  hedging  way, 
various  forms  of  which  will  readily  suggest  themselves  to  any  banker. 

The  sender  of  such  a  message  has  no  right  to  ask  for  a  stronger 
telegram.  If  he  pays  money  on  the  strength  of  it  he  must  do  so  with 
the  risks  resting  upon  his  own  shoulders. 

Bankers  have  sometimes  attempted  to  set  aside  the  balance,  which 
has  thus  been  apparently  certified  by  telegraph,  without  the  actual 
presentation  of  the  check.  Such  a  course  would  take  on  an  embar- 
rassing aspect  were  other  checks  of  the  same  drawer  to  press  for 
payment  before  the  wired  one  should  come  around  for  the  cash. 
There  is  no  doubt  but  that  the  holders  of  such  interim  checks  could 
enforce  their  payment. 

CODES  AND  CIPHERS. 
Bankers  are  almost  invariably  in  the  habit  of  using  these  in  sending 
despatches  relative  to  transfers  of  funds  and  purchase  and  sale  of 


218  PRACTICAL   BANKING. 

securities.  In  fact,  the  general  run  of  the  wiring  business  of  a  bank 
is  of  a  eliaraeter  involving  so  much  money-value  responsibility  that 
very  little  of  it  can  be  safely  done  in  plain  English. 

From  what  I  have  already  said  it  will  readily  be  recognized  that  the 
cipher  answers  a  double  purpose  and  serves  as  a  short-hand  as  well  as 
a  useful  and  safe  disguise. 

In  cable  work,  for  money  transfers,  and  various  missions,  tiie  cipher 
is  "widely  used. 

Not  long  ago  there  was  sent  to  a  Boston  banker  a  notice  of  protest 
of  a  London  sterling  bill  which  came  to  him  in  cipher. « 

The  cipher  and  code-books  upon  which  such  important  telegraphing 
Is  based  .should,  of  course,  the  same  as  other  valuables,  be  kept  under 
lock  and  key  by  the  Cashier. 

SENDING   MONEY   BY    TELEGRAPH. 

But  the  most  striking  advantages  of  telegrajihy,  as  applied  to 
banking,  are  shown  in  the  business  of  making  direct  transfers  of 
money  by  telegrapli,  a  method  which  is  daily  upon  the  increase,  and  a 
description  of  which  must  necessarily  occupy  an  important  place  in 
any  treatise  upon  practical  banking.  The  methods  and  machinery  of 
this  business  are  easily  described,  for,  after  all,  there  is  nothing 
complicated  nor  obscure  in  transactions  of  this  character,  except  we 
may  apply  these  terms  to  that  mysterious  agency  which  no  one  under- 
stands and  which  no  one  attempts  to  explain — the  electricity  which 
really  does  the  work. 

Many  business  people  who  avail  themselves  of  the  telegraph  in 
transmitting  funds  to  points  more  or  less  distant  are  but  little  acquainted 
with  the  exact  methods  used  in  making  these  remittances,  yet  the 
process  is  a  simple,  every-day  one.  It  can  be  best  explained  by 
describing  an  actual  transaction  of  this  character — by  giving  a  little 
picture  of  the  business  from  real  life  in  banking. 

So  here  is  an  exact  account  of  some  payments  by  wire  that  in  their 
features  happen  to  illustrate  quite  fully  the  most  common  crooks  and 
turns  of  the  money-by-telegraph  business.  At  any  rate  the  reader 
who  understands  all  that  I  here  describe  of  a  couple  of  wire  transac- 
tions in  money  will  readily  comprehend  the  leading  characteristics  and 
methods  of  this  Ijraiicli  of  modern  banking,  and  can  cipher  out  the  rest 
of  the  philosophy  and  i^ractice  of  this  rai:)id-transit  traffic  at  his  leisure. 

A  bank  in  8an  Francisco  keeps  an  account  in  Boston.  In  opening 
this  account  it  arranged  to  do  a  telegraphic  money  transfer  business, 
and  sent  a  cipher  or  code-book  to  be  used  for  that  purpose.  This  cipher 
book  simply  contains  an  index  list  of  words  and  phrases  which  are  i)ut 
to  what  may  l^e  termed  arbitrary  use — that  is,  the  very  irniocent  looking 
Avords  and  sentences  thus  listed  stand  for  amounts  and  expressions 
entirely  unlike  their  individual  selves.  This  cipher  code-book  contains 
a  translation  of  its  language  set  oflE  against  each  word  and  phrase.  The 
California  bank  retains  a  copy  of  the  book.     Both  banks  keep  the  code- 


THE    MAIL    A^'D    THE    TELEGRAPH. 


21» 


book  in  careful  custody — under  lock  and  key  and  at  the  command  only 
of  the  oflBicers  specially  deputed  to  use  it. 

THE   CODE-BOOK  AXD    WIliES   AT    WORK. 

The  man  lived  in  San  Francisco.  His  mother  was  a  poor  widow  in 
Boston.  She  was  ill — very  ill — and  she  succeeded  in  wiring  her  son 
to  that  effect,  and  asking  for  money  immediately.  The  son  paid  ^2Q0 
into  the  hands  of  the  San  Francisco  bank  and  obtained  from  that  bank 
what  may  be  termed  a  §200  telegraphic  check  on  Boston  payable  to  his. 
mother.  The  San  Francisco  bank  wired  the  check  to  its  correspondent, 
and  here  it  is  (see  Form  52),  the  cipher  words  and  the  proper  names 
being  changed  in  this  copy,  because  it  would  not  be  safe  to  print  the 
original  ones.  But  the  "^vords  used  in  the  genuine  dispatch  were  f  uUy- 
as  incoherent  and  apparently  meaningless : 


Th^  \/VtS.T  tRU  \Ju\0HTt\_^Cr^A9H   QjOMPKHX 


NO: 


Oil?. 


Dated   QVCIU T ^ OU CU Ca ,   L/pL^. 

To -^  irujdK.  OiuJZ^  fXUJL  , 


\5  "yUcoj    \IU. 


^      ^  (o  Oiling  ^Udg  J. 


\yjjj^^j\A.^ 


Form  52. 

Here  is  a  translation  of  the  despatch,  made  by  consultation  with, 
the  cipher  book : 

"Notify  arul  pay  Mrs.  Mury  fones,  96  Oak  street,  tmo  hnadred  dollars." 
PAYING  A   TELEGRAPHIC  CHECK. 

The  Messenger  of  the  bank  was  sent  to  the  street  and  number 
named  in  the  telegram  in  search  of  Mrs.  Mary  Jones,  the  payee. 
Extreme  care  is  necessary  in  doing  this  wire-transfer  business;  and  So, 
in  the  case  in  question,  the  Messenger,  to  make  doubly  sure  he  had 
found  the  right  party,  and  that  the  telegram  under  which  he  was 
acting  was  genuine  and  correct  in  all  points,  had  some  little  talk  with 
the  Mrs.  Jones  he  found  at  the  given  number,  for  the  purpose  of  eliciting 
from  her  any  facts  which  appeared  to  corroborate  the  correctness  of  the 
transaction  to  which  she  was  to  be  a  party. 

Any  corroboration  of  the  cipher  message,  no  matter  what  may  be 
its  nature,  is  very  desirable. 

The  whole  business  of  transferring  money  by  wire  is  considered 
delicate  and  critical,  and,  to  avoid  risks,  the  utmost  care  must  be 
taken  in  the  discharge  of  all  its  details.     Persons  engaging  in  transac- 


220  PRACTICAL    BANKING. 

tious  of  this  sort  are  liable  to  the  risks  of  having  their  cipher  codes 
stolen  and  used  for  fraudulent  purposes,  and  to  other  very  evident 
dangers. 

Prom  the  lady  he  learned  that  she  had  a  son  in  San  Francisco  from 
whom  she  was  expecting  an  immediate  remittance.  It  only  remained 
for  Mrs.  Jones  to  identify  herself — to  satisfy  the  bank  that  her  name 
■was  Mary  Jones.  This  having  been  done  she  was  paid  the  $200  and 
her  receipt  taken.  The  San  Francisco  bank  was  at  once  advised  by 
mail  of  the  payment.  In  due  time  confirmation  by  mail  of  the  wire 
check  must  be  received  from  the  San  Francisco  bank ;  under  a  proper 
system  a  bank  does  not  consider  itself  done  with  the  payment  until 
such  a  confirmation  has  come.  The  transaction  I  have  described  is  a 
fair  specimen  of  the  class  of  wire  payments  to  which  it  belongs. 

Here  is  a  hasty  description  of  a  wire-money  transfer  of  another 
type,  which  is  also  a  good  illu.strative  case : 

Bro\vn  &  Co.,  of  Boston,  ask  me,  a  Boston  bank,  to  pay  Jones  & 
Co.,  of  New  York,  $100,000  at  once  by  wire.     I  have  no  New  York 
cipher.     I  send  this  telegram  in  plain  Enghsh  to  my  correspondent 
bank  in  New  York : 
National  Bank,  New  York. 

Pay  Jones  &  Co.,  10  Wall  street.  New  York,  One  Hundred  Thousand  Dollars 
and  charge  my  account.  ,   Cashier. 

My  New  York  bank  dare  not  take  any  risk  with  such  a  telegram  as 
this.  The  reasons  for  their  hesitation  must  be  e\ddent  to  any  banker. 
They  are  found  in  the  fact  that  under  its  present  system  telegraphy 
is  a  very  loose  business.  A  person  can  enter  any  large  telegraph  office 
and  send  in  any  name  any  decent  sort  of  a  despatch  to  anybody.  For 
instance,  a  boy  can  go  into  the  office  of  the  AVestern  Union  in  Boston, 
and  send  in  luy  name  a  despatch  to  any  of  my  correspondents  any- 
where, asking  the  payment  to  anybody  of  any  sum  of  money,  with  a 
request  that  the  same  be  charged  to  my  account.  No  remedy  for  this 
state  of  things  has  so  far  been  suggested.  The  difficulty  can  only  be 
met  by  setting  up  some  system  of  identifying  senders  of  messages, 
which  at  present  seems  impraeticable. 

But,  recurring  to  my  New  York  telegram,  requesting  in  plain 
English  the  $100,000  payment  in  New  York — returning  to  it  for  illus- 
tration of  the  points  in  hand — the  question  at  once  comes  up  of  how 
shall  its  correctness — its  genuineness — be  proved. 

To  prove  the  telegram  a  despatch  can  be  sent  to  me,  the  apparent 
author  of  the  first  despatch,  over  another  line,  asking  if  I  have  sent  such 
a  message.  This  precaution  is  often  resorted  to.  It  is  a  measure  of 
prudence,  but  not  one  of  absolute  security,  since  collusion  of  rogues 
may  defeat  its  purpose. 

Another  solution  of  the  case  before  us  may  be  reached  in  this  way: 
The  New  York  V)ank  may  make  the  wire-requested  payment  by  taking 
collateral  for  the   telegram — that  is,    it  may   pay  Jones  &   Co.   the 


THE    MAIL    AND    THE    TELEGRAPH.  221 

$100,000  on  their  depositing  that  amount  of  good  collateral,  the  same 
to  be  held  until  they  receive  a  mail  confirmation  of  the  despatch. 

But  the  dijfficulties  of  the  case  I  have  here  presented  show  the  great 
advantages  of  having  in  use  for  such  a  transaction  a  good  cipher  code. 

AN   IMPROMPTU   CIPHER. 

Bankers  and  others  sometimes  call  to  their  aid  in  emergencies  just 
described  an  impromptu  cipher.  There  are  many  varieties  of  them  to 
use.  Any  bank,  which  is  in  regular  daily  remitting  coiTCspondence  with 
any  other  bank  at  some  point  more  or  less  distant,  can  extemporize  a 
cipher  which  shall  serve  as  proof  or  identification,  of  its  important 
business  telegrams.  I  have  used  this  method  many  times  quite  success- 
fully. Let  it  send  its  money-transfer,  or  other  telegi*am,  involving  in 
their  recognition  and  action  a  money  responsibility,  in  ordinary  plain 
words,  adding,  as  a  key  to  their  real  origin,  this  sort  of  an  expression : 

"Smallest  check  sent  you  in  ours  of  yesterday ,  Philadelphia,  $5.75." 

The  bank  receiving  such  a  telegram  turns  at  once,  if  it  understands 
this  plan,  to  "ours  of  yesterday,"  and  if  it  there  finds  "Philadelphia, 
$5,75,"  it  concludes,  of  course,  that  the  despatch  is  all  right. 

I  have  been  amused  by  instances  where  I  have  tried  a  cipher  of 
this  description  on  banks  which  had  never  heard  of  the  method.  Such 
banks  have  wired  back  to  me  that  they  had  received  and  obeyed  my 
despatch,  but  did  not  understand  what  I  meant  by  my  reference  to 
the  remittance  of  yesterday.  But  the  reference,  though  not  directly 
understood,  had  e\adently  served  its  identifying  and  proving  purpose. 

There  is,  however,  a  dangerous  feature  lurking  in  codes  of  this  type 
to  which  particular  attention  should  be  drawn.  It  will  be  seen  at 
once  that  a  cipher  of  tliis  character  is  within  the  reach  of  almost  any 
officer  of  the  bank.  Any  subordinate  can,  in  fact,  get  up  at  any  time 
one  of  these  cipher  messages.  He  has  only  to  take  the  key  from  the 
letter  copy-book,  which  is  open  to  the  inspection  of  all  the  clerks,  and 
^vith  it,  if  it  suits  his  purpose,  can  easily  coiiunit  his  bank  to  almost 
anything  he  pleases.  For  instance,  a  defaulting  officer  may  send  to 
the  bank's  correspondent  at  any  point  the  following  message :  "  Please 
pay  John  Jones  one  hundred  thousand  dollars  and  charge  same  to  our 
account.  Smallest  item  in  ours  of  yesterday,  Philadelphia,  ten  dollars. 
Signed,  R.  Smith,  Cashier. "  And  if  such  dispatch  was  obeyed,  as  it 
might  be,  some  confederate  of  the  defaulter  could  take  the  money  and 
a  trusting  bank  be  to  that  extent  the  loser. 

This  is  only  one  more  illustration  of  the  dangers  environing  the  use 
of  the  telegraph  in  business  relating  to  responsible  action.  Banks 
cannot  be  too  careful  in  the  matter  in  question.  Those  institutions 
•which  are  very  careful  about  locking  up  their  code-books,  and  allow 
them  to  be  opened  to  but  few  eyes,  have  been  known  to  fall  into  the 
habit  of  using  ready-made  ciphers  which  were  at  the  command  of  every 
man  or  boy  in  their  bank. 

The  large  telegraph    companies  liave  very  complete  and   exact 


222  PRACTICAIi  BANKING. 

methods  of  doing  this  money-transfer  business.  It  is  witli  them  put 
iu  charge  of  an  expert  and  reliable  officer  termed  a  Transfer-Clerk. 
He  receives  all  money  to  be  remitted  by  wire,  writes  the  transfer  order 
himself,  in  the  company's  cipher,  and  hands  the  same  to  an  operator 
who  has  not  the  least  idea  of  the  character  of  the  message  he  is 
sending.  This  message,  after  reaching  the  point  of  the  money-transfer, 
is  repeated  back  to  the  sending  Transfer-Clerk  to  guard  against  all 
frauds  and  errors.  A  standing  rule  with  them  is  that  all  transfers  not 
called  for  within  forty-eight  hours  after  the  reception  at  the  paying 
office  will  be  canceled,  and  the  amount,  less  premium  and  tolls, 
refunded  to  the  sender.  All  applicants  for  transfers  of  money  have 
to  leave  their  signatures. 

We  remark  further,  in  the  matter  of  these  transfers,  that  the  volume 
of  this  sort  of  business  done  in  the  East  is  not  extremely  large.  Our 
bankers,  as  a  general  thing,  do  not  care  to  go  into  it  at  all.  and  what 
they  do  consent  to  do  is  rather  performed  as  a  matter  of  accommoda- 
tion than  otherwise.  But  in  the  far  West,  particularly  in  the  mining 
regions,  the  bankers  all  advertise  their  willingness  to  do  this  kind  of 
business,  and  the  amount  of  it  transacted  by  them  is  very  large. 
When  Mr.  John  Oakhurst,  of  Roaring  Camp,  or  either  of  the  two  men 
of  Sandy  Bar,  wish  to  make  a  remittance  to  the  East,  they  always  go 
to  the  Western  Union  telegraph  office  or  to  some  banker  who  uses 
the  wires. 


EXCHANGE    AND    LETTEll    OF    CREDIT.  223 


CHAPTER     XIV. 

EXCHANGE     AND     LETTER     OF     CREDIT. 

Many  persons  fail  to  understand  the  movements  of  and  dealings  in 
exchange,  which  are  such  leading  features  in  practical  banking.  Sterling 
exchange  appears  to  some  the  most  difficult  thing  in  the  world  to 
clearly  understand  even  in  these  days  of  such  active  international 
banking.  National  banks  all  over  the  country  are  placing  themselves 
in  a  position  to  draw  bills  on  London.  A  proper  explanation  of  the 
money  movements  of  the  class  we  have  named  ought  to  make  them 
perfectly  easy  of  comprehension  by  any  person  capable  of  under- 
standing the  simplest  arithmetical  problem.  Here  is  all  that  need  be 
said  in  explanation  of  the  sterling  exchange  business : 

The  legally  set-up  par  value  of  a  pound  sterling  is  with  us  $4.86.65. 
If  I  am  in  New  York  and  owe  £1,000  to  a  party  residing  in  London  I 
look  about  me  to  see  how  1  can  pay  the  debt  in  the  cheapest  way.  If 
I  can  buy  a  sight  sterling  bill  on  London  for  the  £1,000  at  $4.90,  or 
less,  I  buy  the  bill  and  remit  it  to  my  London  creditor,  and  that  ends 
the  matter.  If  I  cannot  buy  the  bill  named  without  paying  more  than 
$4.90  for  it,  I  ship  to  my  creditor  in  London  £1,000  in  cash  gold,  or 
that  value  in  American  coin. 

I  ought,  however,  to  note  here  that,  if  I  am  banking  in  sterling 
exchange  to  very  large  amounts,  I  might,  perhaps,  be  willing  to  remit 
gold  rather  than  pay  even  $4.89.50  for  bills.  The  influence  at  work  to 
bring  me  to  a  decision  whether  to  export  the  gold  or  remit  the  sterling 
bill  is  the  expense  of  handling  the  gold  as  found  in  the  following  bill 
of  costs  for  shipping  gold  from  New  York  to  London : 

Freight — \  of  1  ^.  hisurance — I  of  1  ^.  Cooperage — Too  small  to 
consider.  Abrasion — From  notliing  to  i  of  1  ^  on  $20-pieces  \^  'foto  \fo 
on  $10-pieces  and  ^  ^  to  i  ^  on  $5-pieces. 

If  a  party  in  London  owes  me  £1,000,  I  collect  this  debt  by  selling 
my  sight  sterling  bill  on  him  for  the  £1,000  if  I  can  get  $4.83  for  it.  If 
I  cannot  get  at  least  $4.83  for  this  bill  it  is  more  profitable  for  me  to 
collect  it  myself  in  London,  of  course  through  correspondents,  and 
have  the  gold  shipped  to  me,  to  be  sold  here  at  its  market  value,  unless 
it  should  be  American  coin.  The  cost  of  bringing  gold  from  London 
to  New  York  is  the  same  as  from  New  York  to  London. 

I  have  made  my  illustrations  show  the  principle ;  but,  in  even  so 
standard  an  article  as  gold,  the  actual  demand  in  the  London  or  the 
New  York  money  market  wiU  affect  its  value — at  least  its  value  for 


224  PRACTICAL    BANKIXG. 

financial  uses — and  this  value  of  the  moment  must  be  ascertained  before 
making  close  figures  on  a  large  transaction. 

The  philosophy  of  movements  in  domestic  exchanges  is  just  the 
same  as  that  described  as  underlying  the  sterling  excixange  business, 
A  brief  explanation  of  domestic  exchange  methods  may  make  my 
descriptions  of  sterling  transactions  more  easily  understood,  since  the 
domestic  exchange  matter  is  free  from  that  confusing  element — a  dif- 
fering currency.  In  sterling  exchange  we  have  to  do  with  a  mixture 
of  dollars  with  sovereigns ;  in  domestic  exchange  we  have  a  dollar  at 
both  ends  of  the  route.  Here  is  an  account  of  a  domestic  exchange 
transaction,  which  is  an  every-day  occurrence  with  me,  that  will  give  a 
good  idea  of  the  whole  circle  of  the  domestic  exchange  business : 

I,  a  bank  in  Boston,  owe  a  bank  in  New  York  $100,000,  which  must 
be  paid  at  once.  I  seek  for  a  check  on  New  York,  and,  if  I  can  get 
one  without  paying  more  than  fifty  cents  per  §1,000  for  it,  I  pay  my 
New  York  debt  by  remittance  of  the  New  York  check.  If  I  cannot 
buy  the  §100,000  New  York  check  without  paying  more  than  fifty  cents 
per  $1,000  for  it,  I  send  the  New  York  bank  the  gold  or  legal  tenders, 
for  I  can  do  this  by  paying  not  over  fifty  cents  per  $1,000  for  the 
transportation  of  this  cash  to  New  York.  If  I  have  owing  me  in  New 
York  $100,000  which  I  may  collect  at  once,  I  draw  my  check  on  New 
York  for  the  same  and  sell  it  in  Boston,  if  I  can  do  so  at  a  cost  not 
exceeding  fifty  cents  per  $1,000  discount.  If  I  cannot  sell  this  $100,000 
New  York  check  without  allowing  more  than  fifty  cents  per  $1,000 
discount,  I  send  the  check  to  New  York,  draw  the  gold  or  greenbacks, 
and  import  the  same  to  Boston.    This  I  can  do  for  fifty  cents  per  $1,000. 

It  will  be  observed  that  the  variation  La  exchange  between  the  two 
points — that  is,  the  difference  between  the  extreme  quotations,  which 
is  necessary  in  order  to  change  the  route  of  the  gold  or  legal-tenders — 
is  just  $1.  or  twice  the  sum  I  have  assumed  to  be  the  cost  of  its 
transportation  one  way.  In  my  sterling  figures  the  same  kind  of 
exchange  variation  existed. 

It  is  easy  to  perceive,  looking  at  the  exchange  operations  between 
Boston  and  New  York — looking  at  them  from  the  standpoint  of  Boston 
— that  exchange  on  New  York  must  be  low  when  Boston  is  selling  New 
York  more  goods  than  New  York  is  selling  Boston. 

"When  New  York  exchange  is  low  in  Boston  we  say  that  it  is  in  our 
favor -that  the  balance  of  trade  between  the  two  cities  is  in  favor  of 
Boston.  This  happens,  for  illustration,  when  Boston,  which  is  the 
centre  of  the  manufacturing  interest  of  New  England,  is  selling  heavily 
of  her  mill  products  in  New  York,  and  buying  lightly  there  of  that 
city's  foreign  goods,  shares,  bonds,  etc.  At  such  times  gold  and  legal- 
tenders  flow  in  large  amounts  from  New  York  to  Boston,  moving  over 
by  the  great  express  routes.  A  situation  of  the  domestic  exchange  market 
which  is  the  reverse  of  this  will  be  understood  without  explanation. 

In  just  the  same  way  exchange  on  London  is  low  in  Boston  and 


EXCHANGE    AXD    LETTER    OF    CREDIT.  225 

New  York  when  the  balance  of  trade  between  the  United  States  and 
England  is  in  our  favor.  The  balance  of  this  trade  is  in  our  favor 
when  we  are  sending  England  more  in  value  of  our  produce — wheat, 
cotton  and  provisions— than  we  are  importing  from  England  of  her 
manufactured  goods — or,  1  might  say,  of  the  silks,  woollens  and  fancy- 
goods  of  Lhe  whole  of  Eui-ope,  for  our  pay  for  all  is  settled  through 
London  bankers. 

When  this  is  the  condition  of  affairs  all  our  bankers  who  deal  in 
sterling  exchange  are  ready  to  sell  their  bills  on  London,  and  there  are 
few  buyers,  hence  low  quotations  for  exchange,  and,  as  in  my  sup- 
posed case  of  the  £1,000  due  me  in  London,  the  drafts,  or  the  debts, 
are  collected  there  and  the  gold  is  shipped  over,  so  that  when  London 
exchange  is  low  here  gold  comes  flowing  in  upon  us  from  Europe, 
When,  from  causes  the  opposite  of  those  described,  we  are  buying  of 
Europe  largely,  and  sending  her  little  of  our  wheat  and  cotton,  London 
exchange  is  high  Avith  us  and  gold  moves  Eastward — flows  from  New 
York  to  London.  There  are,  of  course,  other  eleuients  that  are 
influences.  When  our  United  States  bonds  and  other  American  securi- 
ties market  themselves  abroad  they  make,  to  the  extent  of  their  value, 
exchange  in  our  favor.  When  Europe  gets  alarmed  over  American 
securities  and  begins  to  send  them  back  upon  us  sterling  exchange 
feels  the  movement.     And  it  is,  of  covu'se,  a  movement  not  in  our  favor. 

There  are  several  terms  relative  to  sterling  exchange  which  are 
often  heard  on  'Change  and  read  in  the  papers  which  should  be  under- 
stood : 

Bankers'  bills  of  exchange  are  bills  drawn  by  bankers  upon  bankers. 

Commercial  bills  are  those  based  upon  movements  of  merchandise, 
and  drawn  by  merchants. 

Documentary  bills  are  those  which  are  accompanied  by  the  bills  of 
lading. 

Posted  or  nominal  rates  for  exchange  means  the  rate  daily  posted 
upon  the  bulletins  of  the  dealers  in  exchange  for  the  use  of  the  general 
public. 

Actual  rates  are  the  real  terms — the  inside  terms  made  to  brokers 
through  whom  most  of  the  trades  are  made. 

Whatever  may  be  the  rates  of  exchange  between  domestic  points, 
o^  between  New  York,  London  or  Paris,  there  will  always  be  a  demand 
at  both  ends  of  the  route  for  bills  of  exchange — for  checks,  drafts  and 
letters  of  credit  payable  at  the  other  point.  The  retail  exchange  busi- 
ness of  the  globe  will  always  be  transacted  by  the  use  of  paper  credits. 
It  matters  not  what  may  be  the  rates  of  exchange  between  New  York 
and  Boston,  as  far  as  the  necessity  of  a  certain  supply  of  checks  and 
bills  of  exchange  for  use  between  these  two  points  is  concerned.  New 
York  bankers  must  always  be  in  readiness  to  draw  on  Boston  for  their 
customers,  and  Boston  umst  always  be  able  to  draw  on  New  York,  and 
New  York  and  Boston  banks  and  bankers  must  always  be  able  to  draw 


226 


PKACTICAL    BAXKIXQ. 


on  London — to  draw  drafts  and  to  issue  letters  of  credit  for  travelers 
for  use  in  Europe.  To  meet  this  convenience  demand  our  New  York 
and  Boston  bankers,  when  exchange  is  against  them,  must  ship  gold 
to  London,  even  beyond  payments  of  tlieir  debts,  and  on  these  gold 
credits  draw  for  merchants  and  tourists. 

LETTER    OF    CREDIT   AND    CIRCULAR   NOTE. 
Within  the  last  few  years  there  have  been  introduced  very  many 
improvements  in  the  methods  and  machinery  of  the  traveling  credit- 

ClRLTIAK  IETTEH  OF  CREDIT. 

S^c-  124500  <^fCJl%^,£/L//ar'^/  Xf /y 


yr^t^^z^  j^jj_  '^^-i^j-^M&ssK.sBRWN,  Shipley  &  C9 


•i/i^r 


Form  53— first  page. 

supplying  business,  and  every  day  competition  is  bringing  new  ideas. 
Leading  American  houses  in  the  foreign  credit  line  issue  drafts  in  sums 
to  suit  on  over  GOO  places  in  Europe,  Asia  and  Africa.  They  also 
fmmish  blank  drafts  printed  in  all  the  leadhig  languages. 

The  ordinary  Letter  of  Credit  is,  however,  the  leading  and  usual 
instrument  for  the  use  of  travelers  in  Europe,  etc. ,  and  has  now  be- 


EXCHANGE    AND    I.ETTKK    OP    CREDIT. 


227 


come  such  a  common  feature  of  banking  that  a  special  explanation  of 
the  methods  of  issuing  these  elastic  and  indispensable  bills  of  exchange, 
and  also  of  using  them,  is  certainly  in  place. 

For  the  better  information  of  the  reader,  we  print  a  fac  simile  of 
the  first  and  second  pages  of  a  Circular  Credit  except  as  to  paper,  tint, 
size,  etc.  (see  Forms  53  and  54),  which  will  give  a  much  clearer  and 
better  idea  of  its  form  and  avtdlabilitythan  any  mere  written  description. 

The  first  page  is  the  Credit  j)roper,  authorizing  the  various  cor- 
respondents of  the  house,  who  are  named  on  the  third  and  fourth 
pages  (som.e  four  hundred  in  nvmaber),  or  any  other  banker  to  whom 


Dat*  when 


^y  Mrltom  paid. 


^iU< 


Amount  pakl  cTTHCSsed 


Anount  In  figures. 


'2° 

\         op 


.,     \i£/tn^o^  /Va.t<J.  ^t^ 


(\.jf>^/^*-^   V/^i^S'i^;^ /^^^>-7-^^^  \    <, 


/o\ 


Form  54— seconil  page. 

the  letter  may  be  presented,  to  pay  the  holder  of  the  Credit,  whoss 
signature  is  given  on  its  face,  to  the  extent  of  £500  sterling. 

The  second  page  of  the  Credit  shows  how  the  holder  availed  him- 
self of  the  amount,  commencing  his  trip  at  Liverpool  and  ending  it  at 
Cork,  whither  he  embarked  for  home. 

As  stated,  there  are  nearly  four  hundred  names  and  places  upon  the 


228  ru  ACTIO  AL    baxkixg. 

indication  list  attaclieil  to  the  Credit,  covering  the  entire  civiHzed 
■world,  so  that,  with  one  of  these  Credits  in  liis  possession,  the  traveler 
can  journey  from  place  to  place  and  make  the  entire  circuit  of  the 
globe,  and  never  have  in  his  pocket  gold,  silver  or  paper  money  more 
than  is  necessaiy  to  pay  his  immediate  expenses. 

Our  banks  and  bankers,  who  are  in  this  Letter  of  Credit  busines^, 
issue  them  upon  the  satisfactory  introduction  and  identification  of  appli- 
cants upon  terms  wliich  are  usually  of  about  this  character(see  Form  55) : 


A.— Against  Cash  payment  {for  sums  of  £500,  and  over),  without  allowance  of  interest, 
Itutfrec  of  commission,  at  selling  rate  of  exchange  for  demnnd  bills  on  London  on 
tfie  day  of  issue. 

The  unused  portion  of  any  such  Credit  will  he  refunded  at  purchasing  rate  of 
exchange  for  demand  bills  at  the  time  of  its  return. 
B. — For  a  Commission  of  1  per  cent,  upon  the  amount  used,  as  follows : 

1. — Against  Cash  payment  (for  sums  under  £500),  ^cithout  allowance  of  interest, 
at  selling  rate  of  exchange  for  demand  hills  on  London  on  the  day  of  issue. 
The  unused  portion  of  anj'  such  credit  will  bo  refunded,  with  its  proportion 
of  Its  commission,  at  purchasing  rate  of  exchange  for  demand  hills  at  the  time 
of  the  return. 
2.— Against  the  Deposit  of  an  approximate  amount  of  cash.     Re-drafts  willhe 
charged  in  account  at  selling  rate  of  exchange  for  demand  bills  on  the  day 
they  are  received.    On  deposits  of  $2,500,  or  over,  interest  will  be  alloived  at  1 
per  cent,  under  the  current  value  of  money  for  call  loans,  but  not  exceeding 
U  per  cent,  per  annum,  '< 

3. — Against  satisfactory  guarantee  of  repayment  as  drafts  appear. 
4. — Against  deposit  of  sound  marketable  securities.  In  the  absence  of  any  | 
other  provisions  for  the  re-payment  of  the  amount  used,  the  securities  ivillbe  \ 
sold  as  required  to  pay  sums  drawn  tinder  the  Credit.  For  making  such  sales,  | 
or  for  the  collection  of  interest  or  dividends  on  such  securities,  a  charge  of  J4  j 
per  cent,  commissioii  will  be  made. 

T7iese  Credits,  bearing  tlie  signature  of  the  Jiolder,  affoi'd  a  ready  mea  ns  of  \ 
identification,  and  can  be  availed  of  wJierever  he  may  be  in  sums  to  m£€t  Im 
requirements.      For  this  purpose  the   Credits  are  specially  addressed,  and  the 
traveler  thereby  accredited,  by  an  indication  list  attached,  to  bankers  of  the  best 
standing  in  all  parts  of  the  world. 

Letters  of  introduction  should,  in  all  cases,  bear  the  signature  of  the  person  introduced. 

Form  55. 

The  terms  quoted  above  are  those  of  Messrs.  Brown  Brothers  &  Co., 
of  New  York,  I'hiladelphia  and  Boston. 

Wherever  he  may  be  the  Circular  Credit  of  such  a  house  as  Brown 
Brothers  &  Co.  is  the  * '  open  sesame  "  to  the  banker's  vault  to  get  the 
"wherewithal "  for  his  needs.  The  risk  of  loss  of  money  is  reduced  to 
a  minimum.  If  the  Credit  should  be  lost  the  chance  of  its  being  used 
by  any  one  else  is  very  remote.  In  an  experience  of  thirty  years  the 
writer  can  only  recall  one  or  two  instances  where  the  finder,  or  stealer, 
of  a  Circular  Credit  successfully  made  use  of  it.  All  the  safeguards 
that  the  experience  of  these  many  years  has  suggested  are  thrown 
around  the  security  of  these  Credits. 

The  value  and  convenience  of  these  Credits,  as  compared  with  a 
Bill  of  Exchange,  is  in  the  fact  that  the  holder  carries  the  means  of 


EXCHANGE    AXD    LETTER    OF    CREDIT.  229 

identification  with  him,  and  that  lie  can  avail  himself  of  the  amount 
in  just  the  suras  needed  to  meet  his  requirements. 

As  stated  in  the  circular  above  quoted,  these  Credits  are  issued 
against  ' '  Cash  deposits,  or  satisfactory  guarantee  of  repayment. " 

In  the  fli-st  instance  the  traveler  deposits  his  funds  with  the  banker, 
getting  a  credit  for  an  equivalent  amount.  Upon  his  return  to  this 
country,  if  there  is  any  unexpended  balance  of  the  original  amount,  it 
is  refunded  to  liim.  In  the  other  case,  "satisfactory  guarantee  of  repay- 
ment, "the  traveler  arranges  with  his  bank,  or  some  one. else  satisfactory 
to  the  banker,  to  guarantee  repayment  to  the  Letter  of  Credit  issuer. 

SE  T  TL  EM  EN  TS. 

If  your  Credit  has  been  issued  against  ffuarantee  of  repayment,  as 
your  drafts  are  paid  in  London  the  banker  will  redraw  upon  your  pay- 
master in  ^Vmerica  upon  the  following  form  (see  Form  56),  so  that  when 
you  return  home  these  statements  will  afford  you  particulars  of  the 
amounts  drawn  and  paid  without  necessity  for  a  further  statement : 


WHEN  REMIITDSG  PLBABK  BE  PAETICULAR  TO  MENTION  THIS  NUMBEK. 

No.  3o\fj 

NEW  YORK     March    31 ISBO. 

Messrs.  John  Brown  &  Co.^  New  York. 

Dear  Sirs  : 

Our  Ziondon  House  having  paid  the 

Draft  of Mr.   H.   R.   HllSted, under  CredH  ^o ,for...£30^ 

please  remit  us  in  settlement  thereof  as  per  Statement  at  foot. 
We  are,  Tours  respectfully , 

SROWJf  BROTHERS  &   CO, 

Stiai"beTn  ejx-fc- 

Amount  of  Draft £20 

Disbursements £20   @  4-.90. %  98  — 

Commission 1  % 98 

Interest,  etc 30  days  @  6  % 49 

%   99.47 


Form  56. 

Should  your  Credit  have  been  issued  against  cash  deposited,  on 
your  return  the  banker  issuing  the  Credit  will  account  to  you  for  the 
undrawn  balance  in  accordance  with  Article  A  of  the  circular. 

THE  LETTER  OF  CREDIT  IN  USE. 

When  a  banker  issues  a  Letter  of  Credit,  the  party  purchasing  it, 

and  who  is  to  use  it  abroad,  places  his  signature  upon  a  lower  comer 

of  the  document  before  he  leaves  the  office  of  the  banker,  and  writes 

it  in  the  banker's  presence.     He  also  leaves  with  the  drawer  of  his  bill 


230  PRACTICAIi   BANKING. 

others  of  his  signatures.  "We  will  suppose,  for  instance,  that  a  party  is 
proposing  to  travel  in  Europe,  and  is  buying  therefor  a  Letter  of  Credit 
on  Barmgs,  London.  In  such  a  ease  he  leaves  with  his  American 
drawing  banker  two  of  his  signatures,  one  of  which  the  banker  forwards, 
with  the  advice  of  the  drawing,  to  Barings,  London,  and  the  other, 
with  advice  of  the  drawing,  to  the  Paris  agents  of  Barings.  When 
the  bearer — the  payee  of  the  letter — reaches  the  drawees  in  London, 
or  their  agents  in  Paris,  and  asks  for  a  payment  on  account  of  it,  he 
signs  his  namef  in  presence  of  the  London  or  Paris  drawees,  upon  a 
draft  for  the  amount  he  is  collecting;  and  if,  upon  comparison  of 
signatures,  there  seems  a  satisfactory  agreement,  the  traveler,  without 
any  other  identification,  is  paid  his  money  and  goes  on  his  way. 

The  careful  reader  must  see  at  once  that  there  is  a  risk  attendant 
upon  the  identification  practice  which  we  have  described.  What  is  to 
prevent  a  dishonest  holder  of  a  lost  or  stolen  Letter  of  Credit  from 
practicing  upon  the  payee's  signature  upon  the  bill  in  his  hands,  and 
thus  prepare  himself  to  make,  upon  demand,  when  he  presents  such  a 
bill,  a  very  perfect  forgery  of  this  signature  of  the  honest  payee. 

There  is  also  connected  with  this  customary  sole  dependence  upon 
the  signature  identification  of  a  Letter-of-Credit  payee  a  more  patent 
danger.  The  letters  in  question  are  made  payable  at  the  agents  of  the 
drawers  at  hundreds  of  minor  points  in  all  parts  of  the  world.  These 
sub-agents  have  not  even  possession  of  a  previously  forwarded  signa- 
ture of  the  payee,  and  must  depend  alone  upon  a  comparison  of  the 
signature  offered  by  the  payee  with  his  signature  as  shown  on  the  letter 
which  he  brings  in  his  hand. 

These  points  of  danger  in  this  matter  of  identification  of  Letter-of- 
Credit  holders,  are  in  a  measure  avoided  by  a  practice  now  coming  in 
vogue  with  our  most  careful  foreign  bill  drawers  of  placing  squarely 
upon  the  face  of  every  Letter  of  Credit  issued  by  them  a  most  careful 
description  of  the  payees. 

Here  is  one  of  these  Letter-of-Credit  pictures  of  a  payee  (see  Form 
57),  wliich  we  have  copied  from  a  Bill  of  Credit  dra^vn  by  the  "Ameri- 
can Exchange  in  Europe,  Limited :  " 

Age SQ  jjuL(x->y^  ?i  .A»>oo.joJiL^ Chin     7RjLXL-aJlJ_A^^ - 

Stature      5  U:.  1,4  ji^o^.,  SA*_aiv Hair     Sboo^X  JLa-x.^a.>.>/^ 

Torehead      SvJ-oJv Complexion    .c^j<^.U: 

'Eyes     (5jv.oljx Pace "3R.xljo^.n^  o^.^^  LaAI 

Nose    .  JKji->A^~-x^  .    ^1|JL,    <^AxltjL  Particular    Marks <4x:.a-A.  Ijl- 

tlvUt JLu..JLJL>^    iUjtHjU.    OOO^    tk^OvJL 

Mouth  _/VLi.JLLJl>Ou^   '—  JLjLJk»..-a_B_»v.   joJL   Jyu>~aJkX   ivCX_A»_A. 


The  routine  one  goes  through,  in  foreign  lands,  in  drawing  money 
upon  his  Circular  Credit  is  a  simple  one.     An  explanation  of  a  single 


EXCHANGE   AND    LETTER    OF    CREDIT.  231 

transaction  will  make  the  matter  very  clear  and  I  will,  for  illustration, 
take  a  personal  reminiscence,  which  covers  the  most  difficult  sort  of 
case  whieli  is  likely  to  come  up  in  this  drawing  business: 

I  was  in  the  Lake  District  of  England — in  Keswick.  There  was  a 
small  bank  there.  I  had  never  before  been  in  the  place,  knew  no  one 
there,  and  was  not  known  by  any  one.  I  was  getting  out  of  funds,  I 
entered  the  little  bank,  presented  my  letter  of  credit  for  £500,  and 
asked  the  Manager  if  he  could  let  me  have  £50  on  it.  He  looked  at 
this  Letter  of  Credit,  and  said,  pleasantly,  that  he  did  not  know  me,  and 
that  the  last  time  he  made  an  advance  to  an  American  upon  an 
American  credit  he  lost  his  money.  The  day  after  his  payment  the 
issuers  of  the  Credit  (Duncan,  Sherman  &  Co.)  failed,  and  he  never 
heard  more  of  the  payee.  He  asked  if  I  could  give  him  time  to  wire  to 
London  about  the  payment.  I  told  him  I  could  not,  as  I  was  to  leave 
Keswick  at  once.  He  then  asked  me  to  draw  my  check  on  the  bill. 
His  bank  was  not  upon  its  list  of  payees,  yet,  after  comparing  my 
signature  on  my  check  with  that  of  the  Letter  of  Credit,  he  readily 
paid  me  the  £50. 

The  bankers  of  England  are  always  ready  to  cut  red  tape  when 
they  can  do  so  without  incurring  too  great  a  risk,  and,  as  I  have  said, 
they  are  willing  to  rely  upon  signatures  as  a  means  of  identification. 

The  traveler  wishes,  of  course,  to  avoid  by  all  means  the  misfoi'tune 
of  losing  or  mislaying  his  Letter  of  Credit.  He  should  have  a  special 
receptacle  in  which  to  carry  it,  and  it  is  important  that  it  be  kept  free 
from  wearing  and  defacement. 

I  will  assume  that  my  reader  is  looking  forward  to  his  trans- Atlantic 
trip;  and  in  the  rough  expei'ience  of  travel  among  strangers,  in  many 
lands,  he  may  find  this  homely  hint  relative  to  the  care  of  his  funds  of 
some  value. 

You  will  be  pretty  sure  to  place  your  watch,  money,  Circular 
Credit,  etc.,  under  your  pillow  at  night.  But,  in  order  to  escape  the 
awkward  mishap  of  leaving  these  things  where  you  have  slept,  use  one 
of  your  hose  as  a  wrapper  for  them.  You  will  not  be  likely  to  travel 
far  without  that. 

If  you  should  have  the  misfortune  to  lose  your  Cncular  Credit  there 
need  be  no  serious  trouble  (though  the  loss  may  be  embarrassing)  if 
you  make  prompt  use  of  mail  and  wire  to  stop  its  payment  at  head- 
quarters. 

When  abroad  you  will  often  meet  those  who  will  say  you  must  be 
careful  not  to  lose  your  Letter  of  Credit,  and  inform  you  that  if  it  is  lost 
the  loss  will  be  yours  to  the  full  extent  of  the  face  of  the  credit.  They 
are  confident  that  a  dishonest  finder  of  the  letter  who  should  forge 
your  signature  and  draw  the  money  would  inflict  its  loss  upon  you  and 
not  upon  the  parties  who  cashed  it ;  and  they  tell  various  stories  of 
how  travelers  in  England  have  lost  all  their  traveling  funds  in  this 
"way.     These  statements  are  incorrect.     If  you  lose  your  Credit  Letter 


232  PRACTICAL,    BAXKIXG. 

notify  at  once  the  parties  upon  and  by  whom  it  is  drawn.  Whoever 
cashes  your  bill  upon  a  forged  signature  loses,  and  not  you,  provided 
you  have  not  been  negligent  in  patting  them  on  their  guard.  This 
mcorrect  impression  as  to  who  shall  be  held  responsible  comes  from  a 
misapprehension  of  a  peculiar  law  of  England.  The  origin  and  charac- 
ter of  this  law  is  as  follows: 

English  bankers  became  disgusted  with  the  law  and  custom  requir- 
ing that  the  payers  of  checks  drawn  to  order  should  demand  an  identi- 
iieation  of  the  jiarties  collecting  them.  Checks  payable  to  bearer  could 
be  paid  without  risk  and  responsibility  on  the  part  of  the  bank;  but,  if 
the  checks  payable  to  order  were  paid  to  the  wrong  person  on  a  forged 
endorsement  or  anything  else,  the  bank  was  the  loser.  The  banks 
pressed  Parliament  to  make  a  law  putting  both  classes  of  checks  on 
the  same  footing,  and  such  a  law  was  enacted. 

"To-day,"  says  a  bank  Teller  of  London,  "I  pass  out  the  money  for 
all  checks  presented  as  fast  as  I  can  to  whoever  presents  them.  My 
only  care  is  to  assure  myself  that  the  drawer's  balance  and  signature 
is  all  right." 

When  told  that  in  the  United  States  identification  was  demanded  of 
all  parties  collecting  checks,  no  matter  whether  the  checks  were  pay- 
able to  order  or  bearer,  he  smiled.  He  said  they  never  could  get 
through  with  theh*  banking  business  in  London  if  they  attempted  to  do 
it  that  Avay.  This  remark  is  true,  because  there  are  so  many  people 
there  and  so  much  to  be  done  in  a  short  time  that  a  person  can  hardly 
see  how  they  get  through  at  all. 

This  is  the  check  situation  in  England  to-day:  If  a  check  is 
dropped  in  the  London  streets  the  first  man  who  picks  it  up  can  rush 
into  the  bank  and  collect  it  and  pocket  the  money.  But  to  collect 
money  fraudently  is  a  great  crime.  England  punishes  such  a  crime 
severely.  The  severity  of  its  laws  and  the  promptitude  with  which 
they  are  enforced  are  great  safeguards  in  business  matters. 

The  man  who  loses  a  check  in  England  must  make  lively  time  to 
stop  its  payment.  Until  he  has  stopped  its  payment  he  is  in  the  same 
position  he  would  be  if  he  lost  so  many  Bank  of  England  notes  or 
sovereigns,  and  the  person  who  loses  a  Letter  of  Credit  anywhere  must 
make  quick  time  in  stopping  its  payment  if  he  would  not  incur  gi-eat 
responsibility. 

Every  traveler's  Letter  of  Credit  has  attached  to  it  a  long  list  of 
banks  and  bankers  where  it  may  be  presented  and  advances  obtained. 
Few  travelers  are  awai'e  that  this  list  is  merely  suggestive.  The  fact 
is,  it  is  to  be  understood  that  the  bill  can  be  jiresented  and  payments 
negotiated  with  almost  any  banker  of  standing  in  any  country  named  on 
the  bill.  It  is  hard  to  imagine  any  civilized  country  on  the  face  of  the 
globe  that  is  not  glad  to  purchase  from  you  a  reliable  sterUng  draft  on 
London.  Such  drafts  should  sell  at  a  premium  almost  anywhere.  A 
Boston  man,  just  returned  from  a  tour  around  the  world,  says  he 


EXCHANGE    AND    LETTER    OF    CREDIT.  233 

always  received  a  premium  when  he  drew  on  his  Letter  of  Credit  at 
points  distant  from  London. 

American  bankers  have  also  mtroduced  a  foreign  money-order 
system  by  which  an  exact  amount  may  be  delivered  free  of  expense 
into  the  very  residence  of  the  recipient  in  places  both  small  and  large 
in  almost  all  parts  of  the  civilized  globe.  The  business  of  paying 
money  by  telegraph  has  also  been  greatly  perfected  by  them. 

A  popular  and  very  convenient  money-supply  for  foreign  travel 
which  has  of  late  come  much  into  use  is  known  as  the  Circular  Note. 
These  notes  are  payable  in  all  the  leading  cities  of  Exirope,  and  are 
issued  in  denominations  of  £5  and  £10  or  their  equivalent  in  other 
European  currencies. 

An  ingenious  endorsement  plan  has  been  adopted  by  the  issuers  of 
the  Circular  Notes.  Holders  of  such  notes  are  required  to  endorse 
them  with  a  certain  word  of  identification,  given  by  the  issuers,  so  that 
in  case  of  loss  none  but  the  party  possessing  this  identification  word  can 
realize  upon  them. 


234  PRACTICAL   BA^'KIXG. 


CHAPTER  XV. 

A  CHAPTER  OX  CHECKS. 

A  bconk  check  is  in  many  respects  the  same  thing  as  an  inland  bill 
of  exchange.  When  it  is  made  payable  to  beai-er,  it  passes  by  delivery. 
It  is,  in  general,  subject  to  the  mles  -which  regulate  the  rights  and 
responsibilities  to  parties  to  a  bill  of  exchange. 

Many  of  the  leading  characteristics  of  a  bank  check  are  so  thoroughly 
well  understood  by  every  one  who  is  likely  to  handle  such  a  document 
or  read  this  volume,  that  there  is  little  need  of  enlarging  upon  them, 
but  here  fire  a  few  points  relative  to  their  various  features  that  are 
not  familiar  to  all: 

The  absence  of  a  date  upon  a  check  does  not  warrant  a  bank 
in  refusing  to  cash  it.  Checks  ought  to  be  dated.  It  is  very  much  better 
that  they  should  be  dated.  It  is  somewhat  irregular  not  to  date  them. 
Nevertheless  I  should  never  refuse  to  pay  a  check  that  was  all  right  in 
other  points  simply  because  it  bore  no  date.  If  I  could  readily  send 
it  back  to  the  drawer,  and  get  him  to  put  in  the  useful  date  figures,  I 
should  do  so.  Otherwise  I  should  pay  it,  and  duly  charge  it  to  the 
drawer's  account. 

Here  is  a  good  form  of  tliB  ordinary  every-day  common  bank  check 
BOW  in  use  (see  Form  58).  It  may  serve  as  a  text  for  the  explan- 
ation of  a  great  many  points  of  interest  and  importance  in  relation  to 
checks. 


^o.-igso, ,  Chicago,    U^-^  ^^^  ISa^ 


PiiytoOieprdi 


^i^.'f^tCkU-'C^fi 


Form  ."R. 

Notes  made  and  executed  on  Sunday  are  invalid,  but  a  check  so 
dated  is  not  invalid,  and  a  bank  has  no  right  to  refuse  to  pay  it  on 
that  account.  This  is  common  law  and  common  sense.  Making  and 
issuing  notes  on  Sunday  smacks  of  trading  on  that  day,  but  a  person 
may  be  really  obUged  to  draw  a  check  on  Sunday — as,  for  instance, 


A    CHAPTEK    ON    CHECKS.  235 

for  some  charitable  or  religious  object  or  to  pay  a  minister  $50  for 
preaching  on  an  exchange. 

In  many  States  the  death  of  the  drawer  of  a  check  renders  it 
legally  uncollectible  at  the  bank  upon,  which  it  is  drawn.  Banks  are 
really  paying  checks  every  day  which  have  been  signed  by  parties 
deceased.  In  very  many  cases  they  have  no  means  of  knowing  that 
death  has  legally  stopped  such  checks.  Such  dead  checks  are  per- 
fectly good  against  the  estates  of  the  drawers. 

In  States  where  grace  prevails  the  statutes  usually  declare  that 
there  shall  be  no  grace  allowed  on  checks  on  banks — make  these  an 
exception  to  the  general  law  providing  for  grace  upon  notes,  drafts 
and  bills  of  exchange. 

The  popular  or  dictionary  definition  of  a  bank  check  is  tliat  it 
is  an  order  on  a  bank  for  the  payment  of  money.  Some  authorities 
who  discuss  this  point  take  the  ground  that  the  document  in  ques- 
tion to  be  a  bank  check — a  Isgitimate  and  regular  bank  check  in  the 
eyes  of  the  law — must  be  an  order  for  the  immediate  payment  of 
money.  Under  this  ruling  they  hold  that  an  order  on  a  bank  for 
the  payment  of  money  at  some  time  in  the  future  —  one  that  "is 
drawn  on  time — is  not  a  check,  but  a  bill  of  exchange  or  draft  ;  and 
that,  being  such,  it  is  as  much  entitled  to  grace,  where  grace  on 
inland  bills  prevails,  as  if  it  was  drawn  upon  persons  or  a  person  or 
upon  any  concern  or  corporation  which  was  not  a  bank. 

This  view  is  not  the  generally  accepted  one  among  our  banks,  nor 
is  it,  in  our  opinion,  correct.  A  check  on  a  bank,  whether  it  reads 
payable  at  sight,  on  demand,  or  at  some  named  date  in  the  future, 
is,  if  we  may  so  express  ourselves,  a  check  in  the  eyes  of  common 
and  statute  law,  and  in  the  opinion  of  the  bankers  and  business 
men  tlirough  whose  hands  it  may  pass.  It  is  simply  a  bank  check  and 
nothing  else. 

Where  laws  prevail  which  declare  that  checks  on  banks  shall  not 
be  entitled  to  grace,  these  orders  for  the  payment  of  money  by  banks 
which  we  have  described  are  payable  without  grace. 

In  the  m.atter  of  signatures  to  checks  the  laws  wliich  I  have  elsewhere 
given  as  governmg  signatures  to  notes  prevail.  They  may  be  signed 
^v\th.  pen,  pencil,  or  with  a  mark. 

HOW  TO  DRAW  CHECKS. 
The  person  who  keeps  a  regular  open  bank  account  should  use  in 
checking  upon  his  balance  a  check  blank  of  uniform  type,  taken  from 
his  regular  book  and  no  outside  source,  consecutively  numbered,  and 
signed  with  a  uniform  signature.  His  check  figures  should  always  be 
supplemented  with  Avritten  ones.  He  should  use  good  black  ink, 
and  endeavor  to  lay  the  ink  on  so  strongly  that  it  will  sink  well  into 
the  fibres  of  the  paper.  The  invariable  quick  use  of  a  blotting  paper 
upon  freshly  drawn  checks  has  a  serious  objection.  It  prevents  the 
new-laid  ink  from  sinking  into   and  becoming,  as  it  were,  part  and 


23G  PKACTICAL    BAISTKIXG. 

portion  of  the  paper,  and  leaves  the  check  from  which  it  has  quickly 
taken  the  wet  ink  lightly  and  indistinctively  impressed  with  its  words 
and  figures.  The  use  of  sand  in  place  of  a  blotter  can  hardly  be 
tolerated  in  common  work,  yet  it  has  its  advantages,  since  it  adds  to 
the  strength  and  force  of  the  fresh  writing. 

Dr.  O.  W.  Holmes,  now  80  years  old,  says :  "1  turn  back  to  a  record 
of  my  birth,  made  by  my  father  the  day  I  was  born,  and  find  the  sand 
sliining  upon  the  entry  seemingly  as  fresh  as  if  it  had  been  flung  there 
but  yesterday." 

In  drawing  checks  it  is  well,  if  possible,  to  let  the  newly-written 
ones  stand  for  a  while,  to  permit  the  ink  to  imbed  itself,  before  you 
press  on  a  blotter. 

In  fllhng  in  the  written  amount  of  a  cheek  commence  the  Avriting 
well  to  the  left,  drawing  a  heavy  line  over  any  space  left  open  to  the 
right. 

Prefixed  alterations  are  generally  more  dangerous,  easier  made  and 
harder  to  distinguish  than  affixed  ones. 

A  check  drawn  for  one  hundred  dollai's  can,  if  the  writing  leaves 
an  open  space  on  the  left,  easily  take  on  a  prefix  of  twenty,  making  it 
twenty-one  hundred  dollars,  while  any  affix  would  be  made  with 
considerable  difficulty. 

The  reader  who  takes  the  trouble  to  make  experimental  studies  of 
the  above  point  will  find  it  well  taken. 

But  in  whatever  way  the  words  of  the  amount  are  inserted,  take 
all  the  necessary  precautions  against  fraudulent  change  by  hedging 
them  well  in  with  fencing  lines. 

The  apparently  very  simple  matter  of  filling  up  a  check  for  a 
fraction  of  a  dollar  is  well  worthy  of  separate  mention. 

Checks  for  sums  inside  of  a  dollar  are  not  an  uncommon  thmg  in 
business.  I  have  seen  many  that  were  for  a  small  part  of  a  dollar 
pass  through  the  exchanges  of  a  bank.  Some  of  these  were  signed 
by  an  official  used  to  the  faces  of  very  heavy  figures — signed  by  the 
Treasurer  of  the  United  States  or  his  deputies. 

There  hangs  in  the  office  of  the  Pacific  Mills,  Boston,  the  cancelled 
check  of  the  United  States  for  one  cent. 

Messrs.  Hewins  &  Hollis,  of  the  same  city,  have  framed  and  hung 
in  their  counting-room  one  drawn  by  the  same  official  for  the  modest 
amount  of  two  cents. 

The  other  extreme  in  checks,  which  naturally  comes  to  mind  in 
this  connection,  may  be  seen  in  the  noble  old  Bank  of  Commerce, 
Kew  York,  where  there  hangs  on  the  wall  a  luuidsomely  framed  and 
.splendidly  drawn  check  for  $14,000,000,  signed  by  the  solid  house  of 
Kidder,  Peabody  &  Co. 

But  the  matter  in  question  is  the  best  method  of  filling  up  a  check 
for  a  fraction  of  a  dollar — a  filling-up  business  that  is  really  not  so 
easy  as  it  seems.     If  any  of  these  little  checks  are  made  out  awkwardly 


A    CHAPTER   ON    CHECKS.  237 

they  are  either  suggestive  of  alteration  to  a  larger  sum,  not  easily  read 
at  a  glance,  or  open  to  some  other  "Paying-Teller  criticism." 

Here  is,  I  think,  the  very  best  form  (see  Form  59)  of  the  little  check 
in  question  that  can  possibly  be  devised: 


$Seventy-five  cents.  new  york,  April  10,  iz90. 

First  National  Bank,  of  New  York. 

Pay  to A.  B.  Carter - or  bearer 

r^.r^-Seventy-iive  cents -- - Dollars 

Day,  Knight  &  Co. 


Form  59. 

In  filling  in  the  above  check  a  Ime  should  be  drawn  with  pen  and 
ink  through  the  word  Dollars. 

Checks  of  many  styles  of  filhng  up  and  endorsement  very  often 
come  under  oui*  observation  that  are  quite  as  objectionable  as  they 
ai'e  peculiar. 

He  came  to  me  with  a  check  payable  to  "  self  or  order."  He  wished 
the  money,  but  refused  to  put  his  name  on  the  back  of  the  cheek, 
although  he  was  the  drawer  of  the  check  which  he  had  made  payable 
to  "self."  It  required  no  little  wearisome  talk  to  convince  him  that 
it  was  a  poor  way  to  frame  a  check,  but  that,  having  been  so  framed, 
he — "self" — really  ought  to  put  his  name  on  its  back. 

Another  person  presented  a  check  filled  out  payable  to  * '  order  of 
bearer,"  which  he  had  taken  from  the  drawer  of  the  check.  It  was 
difficult  to  convince  this  bearer,  who  was  an  identified  party,  that  the 
expression  "order"  in  the  check  seemed  to  demand  bearer's  endorse- 
ment. We  refused  to  pay  the  check  unless  this  endorsement  was 
furnished,  and  so  it  was  reluctantly  ^iven  to  us. 

Still  another  brought  a  check  payable  to  order  of  "J.  R.  I., 
Treasurer  of  Halifax  Mills,"  and  endorsed  precisely  thus  with  the 
initials.  We  asked  him  to  put  on  his  full  name,  as  Treasurer,  as  we 
are  never  willing  to  receive  these  equivocal  initial  endorsements.  We 
always  demand  a  full  name,  and  then,  as  the  greater  includes  the  less, 
we  get  the  initials  and  full  name  also.  He  persistently  argued  that  we 
were  wrong,  yet  finally  did  as  we  requested. 

There  are  only  two  proper  ways  of  drawing  checks.  Draw  them 
either  "to  order"  or  "bearer."  When  drawing  "to  order"  say 
nothing  about  "bearer";  when  drawing  "to  bearer"  say  nothing 
about  "order."  And  when  drawing  "to  order"  di'aw  "to  order"  of 
clearly-described  party.     If  to  an  individual,  give  his  usual  style  of 


238  PRACTICAL    BANKING. 

iiaiue;  if  to  a  Treasurer  or  Agent,  fill  in  what  he  is  Agent  or  Treasurer 
of,  and  require  of  these  endorsers  a  conformity  with  the  face  filling. 
"ORDER  OF  JOHN  DOE  OR  RICHARD  ROE." 

Banks  often  issue  certificates  of  deposit  payable  to  the  order  of 
either  of  two  parties  named  as  payees.  They  also  draw  checks  upon 
corresponding  banks  with  what  may  be  termed  alternate  payees — one 
of  two  named  as  just  described.  And  particularly  in  our  large  cities 
it  is  an  every-day  prafetiee  with  many  bank  depositors  to  draw  checks 
upon  their  balance  in  favor  of  either  one  of  two  parties — to  the  order, 
as  it  were,  either  of  John  Doe  or  Richard  Roe.  The  checks  and 
certificates  of  deposit  which  we  are  describing  are  regular  and  fully 
negotiable  instruments.  Wlien  presented  to  Paying-Tellers  for  pay- 
ment the  endorsement  of  either  one  of  the  payees  is  sufficient  and 
constitutes  a  satisfactory  receipt  for  the  money.  This  is  a  common 
sense  and  common  law  view  of  the  case. 

Our  attention  has  been  called  to  a  decision  of  the  Court  of  Appeals 
of  the  State  of  Maryland  to  the  effect  that  such  instruments  as  we 
have  named  are  not  negotiable,  because  they  are  made  payable  in  the 
alternative  to  one  of  two  different  persons,  and  so  have  not  that 
certainty  in  respect  to  payees  which  the  law  requires  to  make  them, 
negotiable.     If  this  decision  was  made  it  was  incon-ect. 

We  repeat,  any  bank  is  justified  in  cashing  a  check  made  payable 
to  the  order  of  John  Doe  or  Richard  Roe  on  its  endorsement  by  either 
said  John  Doe  or  Richard  Roe,  and  any  other  view  of  the  matter  is 
absurd. 

SAFEGUARDS   AGAINST   FRAUD. 

Safety  devices  to  prevent  the  fraudulent  alteration  of  checks  are  on 
every  hand  and  of  endless  variety.  The  canvasser  for  any  one  of  them 
can  demonstrate  in  a  few  moments  that  all  except  the  particular  one  he 
represents  are  of  not  the  least  value;  and  when  the  merits  of  liis 
invention  have  in  turn  been  demoUshed  by  the  next  agent  it  becomes 
pretty  difficult  to  determine  as  to  the  amount  of  safety  gained  by 
the  use  of  any  of  them. 

A  suggestion  has  been  made  that  banks  might  protect  themselves 
against  the  forgery  of  checks  wliich  they  use  if  they  would  adopt  an 
engraved  check-plate  of  the  highest  style  of  art.  And  the  further 
sugfTcstion  has  been  made  that  all  the  National  banks  of  the  country 
use  a  unifonii  engraved  check-plate  of  the  class  named,  prepared  with 
movable  dates  and  locations. 

There  are  no  very  serious  objections  to  these  suggestions.  Were 
they  adopted  these  between-bank  checks  would,  as  far  as  engraving, 
paper,  etc.,  are  concerned,  have  a  sort  of  National  bank  bill  character. 
But  any  hope  to  'ensure  absolute  protection  against  forgery  by  the  use 
of  these  nice  plates  and  this  uniform  style  would  be  fallacious.  The 
National  bank  bills  upon  whose  plates  and  paper  so  much  mechanical 
skill  has  been  bestowed  have  been  very  successfully  imitated.     There 


A    CHAPTER   ON    CHECKS. 


239 


are  in  circulation  counterfeits  of  these  bills  which  have  been  made  so 
accurate  that  they  have  escaped  detection  and  are  still  doing  circulation 
duty  with  the  genuine  notes. 

Checks  made  like  bank  notes  would  be  more  open  to  forgery,  since 
their  frequently  immense  value  and  their  movable  features  in  the  way 
of  names  and  dates  would  render  them  more  liable  to  fraudulent 
assaults. 

There  has  not  been  a  preventive  against  forgery  and  alterations 
invented  up  to  the  present  time  which  has  not  been  successfully 
assaulted  by  swindlers.  These  so-called  safety  contrivances  tend  to 
make  Tellers  and  others  who  are  daily  called  upon  to  cash  checks 
incautious  about  the  men  who  present  them,  and  thus  they  become 
sources  of  danger  instead  of  a  protection. 

The  drift  of  the  most  advanced  practical  bankers  in  this  matter  of 
safety  in  check  forms  is  towards  the  use  of  a  plain  black  and  white 
check,  drawn  upon  clear  white  paper  with  good  strong  black  ink. 

ERRORS  IN  DRAWING  CHECKS. 
There  are  often  presented  to  banks  for  payment,  checks  in  which 
the  figures  in  the  margin  are  at  variance  with  the  amounts  stated  in 
writing  in  the  body  of  the  checks.  This  discrepancy — this  error — has 
been  made  inadvertently  by  the  signer  or  filler  up  of  the  check.  Here 
is  a  specimen  of  a  check  (see  Form  6U)  of  this  irregular  character : 


O  0  O  V^ 


<j:mc 


-<iSf^-^ 


-1y<y?^::6^W^:^  CHytyf/^ 


ToTlfil9aucinchI}ationalBaiT(i^    ^^^^C^^ 

J(0._L8.5_2  .oe_  1^  0  S  to  1T.112  aSs] ^  - 


CASHIER, 


Form  60. 

Now,  how  does  it  stand  ?  How  shall  it  be  treated  ?  The  law 
governing  eases  of  this  sort  provides  distinctly  that  the  writing  shall 
control.  And  a  bank  would,  therefore,  be  legally  justified  in  paying 
the  larger  amount,  as  written  in  the  body  of  the  check.  But, 
practically,  in  such  eases  as  this,  the  drawee — the  bank — hesitates; 
and,  if  possible,  in  order  to  avoid  trouble  and  losses,  holds  the  settle- 
ment of  the  check  in  abeyance  until,  by  conference  with  drawer, 
endorser,  or  somebody  or  other  who  knows  what  the  check  really  was 
intended  to  be  drawn  for,  a  correct  settlement  of  it  can  be  reached. 

A  bank  confronted  with  a  check  where  the  written  amount  was  less 
than  that  stated  in  the  marginal  figures  would,  of  course,  be  more 


240  PRACTICAL    BAXKIXG. 

inclined  to  settle  the  matter  at  once  by  paying  the  smaller  sum  than  it 
would  to  pay  the  larger  amount  in  the  case  used  as  an  illustration. 
DRAWING  CHECKS  ON  CORRESPONDENTS. 

Banks  in  the  leading  towns  and  cities  of  the  United  States  are  often 
called  upon  to  draw  for  their  dealers  and  others  checks  upon  New 
York,  where  many  of  them  keep  a  portion  of  their  reserve  and  where 
about  all  of  them  And  it  very  convenient  to  keep  an  open  accomit, 
since  New  York  is  the  financial  centre  of  the  country.  To  the  many 
outsiders,  who  are  applying  often  for  small  New  York  checks,  it  is  well 
to  apply  the  rule  of  making  a  small  charge  for  thus  drawing,  no  matter 
what  may  happen  to  be  the  course  of  exchange.  Such  a  charge  is  a 
perfectly  legitimate  one.  This  sort  of  drawing  is  a  trouble  and  expense 
to  the  drawers,  and  throws  work  and  responsibihty  upon  the  drawees. 

I  do  not  think  it  safe  for  banks  to  make  a  practice  of  drawing  such 
small  checks  for  strangers — for  persons  not  identified.  I  have  kno^^^l 
of  cases  where  such  small  checks  have  been  purchased  of  banks  simply 
for  the  purpose  of  fraudulent  use — to  raise  to  larger  amounts.  Great 
care  should  also  be  taken  in  making  these  checks — care  as  regards  the 
paper  ujjon  which  they  are  drawn,  the  style  of  filling  up,  the  character 
of  the  writing,  and  figures,  since  any  neglect  in  these  points  entails 
risk  and  care  upon  drawees ;  and,  in  case  of  loss,  possibly  responsibility 
upon  drawers. 

All  New  York  checks,  or  checks  upon  any  correspondents,  should 
be  issued  payable  to  the  Receiving-Teller,  and  by  him  endox-sed,  since 
he  is  the  officer  who  receives  the  money  for  them  and  makes  upon  the 
books  of  his  bank  the  original  credit  entries,  and  since,  also,  such  a 
countersigning  is  a  check  against  fraudulent  issues  of  cheeks. 

It  is  an  excellent  thing  to  make  it  a  rule  to  issue  all  such  checks  as 
we  are  describing  payable  by  endorsement  direct  to  the  party  who 
takes  them  instead  of  to  a  third  party  to  whom  it  is  to  be  sent.  By  so 
doing  their  liistory,  in  case  of  need,  is  more  readily  traced. 

It  is  also  an  excellent  plan  for  the  Teller  who  countersigns  these 
checks  to  repeat  their  amount  in  writing  on  their  backs  directly  over 
the  signature  of  the  Cashier.  This  repetition  in  such  a  place  helps  to 
prevent  alterations. 

ADVICE    OF    CHECKS   DRAWN. 

In  England,  checks  drawn  between  banks — that  is,  checks  drawn 
by  banks  in  London  upon  their  branches  in  other  localities,  and  ui>on 
other  banks,  and  chocks  drawn  by  branch  banks  and  other  interior 
banks  upon  banks  in  London — are  issued  in  company  with  advices 
of  their  drawing,  which  are  at  once  mailed  or  wired  to  drawees. 

English  banks  are  in  the  habit  of  comparing  all  the  checks  presented, 
of  the  type  we  have  named,  with  the  advices  of  their  drawing,  which 
they  are  supposed  to  have  on  file. 

Regarding   checks   of   individual   depositors,    the   same    practices 


A    CHAPTER    ON    CHECKS.  241 

prevail  in  England  as  here.     No  advice  of  the  drawing  of  such  is 
usually  given — none  is  wished  for  or  expected. 

In  Canada,  until  within  a  very  few  years,  there  prevailed  no  system 
of  cheek  inter-advice  between  the  central  banks  and  their  branches. 
But  some  very  extensive  frauds  which  occurred  there  a  few  years  ago 
in  the  way  of  raising  checks  that  had  been  drawn  by  Canadian  branch 
banks  upon  the  head  banks  in  Montreal  led  to  the  general  adoption  of 
the  English  system  of  advising  bank  checks  upon  banks.  In  Canada, 
as  here,  individual  checks  upon  banks  are  not  advised. 

Under  the  National  and  State  banking  system  of  the  United  States 
there  is  no  general  habit  of  giving  advice  of  the  checks  which  one 
bank  draws  upon  another,  or  which  individuals  draw  upon  their  banks. 
In  those  exceptional  cases  where  banks  are  advised  by  corresponding 
banks  of  the  checks  which  they  draw  upon  them,  the  drawees  who 
receive  such  advance  notices  are  suppposed  to  compare  carefully  each 
check  presented  for  payment  with  this  description  of  it  placed  in 
advance  before  them.  But  the  methods  of  check-settlement  have 
now  become  so  complicated  and  the  volume  of  this  business  has  so 
increased  that  tliis  advice  is  very  exceptional,  and,  where  it  is  still 
adhered  to  on  the  part  of  drawers,  the  practical  result  is  that  few 
payers  are  able  to  watch,  compare  and  be  governed  by  these  advices 
in  the  daily  transactions  of  a  large  banking  business.  Emban*assments 
sometimes  arise  from  this  system  of  advice  that  are  quite  troublesome 
to  Paying-Tellers  and  other  ofiBcers.  Correspondents  who  advise  their 
checks  sometimes  fail  to  get  these  advices  into  the  hands  of  the  banks 
upon  which  the  checks  are  drawn  in  advance  of  the  time  of  their 
presentation — fail  through  errors  and  delays  of  their  own  or  the  mails. 
The  question  then  arises  with  the  bank  upon  which  the  checks  are  drawn 
whether  or  not  these  checks  shall,  if  they  appear  all  right  in  other 
points,  be  duly  honored  in  spite  of  the  abseiice  of  the  usual  advice. 
Intelligent  bankers  do  not  hesitate  long  over  such  a  question  as  this. 
They  pay  the  checks  and  wait  for  an  advice  to  come  afterward.  So 
that,  even  where  an  advice  system  is  in  use,  errors  and  delays  such  as 
those  named  and  the  diflticulty  of  keeping  a  run  of  advices  received 
often  combine  to  make  the  advice  feature  a  dead  letter  with  the  paying 
banks.  Their  Tellers  gradually  fall  into  the  habit  of  paying  all  checks 
as  presented  without  regard  to  the  fact  that  some  of  them  may  be  drawn 
by  correspondents  who  are  accustomed  to  advise.  In  view  of  these  facts, 
and  as  our  banks  have  made  up  their  minds  to  mainly  rely  for  safety 
upon  a  system  of  identification  of  check  collectors  and  a  careful  watch 
over  the  signatures  and  general  flUing-up  of  all  checks  presented  to  them, 
it  might  be  wise  for  banks  and  bankers  to  give  up  altogether  this  old- 
time  practice  of  sending  out  the  between-bank  advices  in  question. 
THE    ISSUE    OF    DUPLICATE    CHECKS. 

This  is  a  very  connnon  thmg  both  in  banking  and  general  business. 
Banks  are  continually  being  called  upon  to  issue  these  dupMcates  to 


242  PRACTICAL    BANKING. 

dealers  who  have  taken  from  them  their  checks  on  corresponding 
banks  and  lost  tliem  by  mail  miscarriages  or  in  some  of  the  various 
ways  in  which  drafts  disappear. 

Banks  often  call  upon  their  dealers  for  duplicates  of  checks  received 
from  them  in  the  routine  of  business  and  lost  in  process  of  collection. 

The  leading  points  relative  to  this  business  of  giving  oxat  duplicates 
are  as  follows :  In  the  first  place  the  bank  or  indi%idual  who  is  asked 
to  issue  a  duplicate  check  has  a  right,  warranted  by  law  and  custom, 
to  demand  that  a  reasonable  time  shall  have  elapsed  before  such  a 
request  is  entertained— that  is,  that  such  a  considerable  period  shall 
have  passed  since  the  check  disappeared  in  the  mail  or  in  some  other 
way  that  there  seems  no  probabihty  of  its  comuig  in  sight  again. 
Circumstances  must  settle  how  long  this  time  shall  be. 

The  applicant  for  a  duplicate  check  is  supposed  to  be  the  party 
w^ho  has  been  so  careless  or  unfortunate  as  to  lose  it ;  and  this  applicant 
must  expect  to  be  called  upon  to  give  a  bond  of  indemnity  in  exchange 
for  the  duplicate — a  bond  to  hold  the  issuer  harmless  and  secure  against 
loss  in  case  the  origmal  turns  up  and  becomes  a  claim  against  the  drawer. 

IndiWduals  furnishing  a  duplicate  check  to  a  well-established 
bank  are  generally  satisfied — and  justifiably  so — with  taking  from 
the  bank  a  simple  receipt  for  the  check,  in  which  is  incorporated  a 
guarantee  against  loss  in  case  the  original  comes  to  hand.  Banks 
furnishing  duplicate  checks  between  themselves  for  one  another  are 
satisfied  with  a  receipt  of  this  type.  All  experienced  bankers  thor- 
oughly understand  these  points,  and  hold  themselves  in  readiness  to 
give  in  exchange  for  the  duplicate  a  bond  guaranteeing  the  issuer 
against  loss  which  may  be  the  outcome  of  the  accommodation. 

Some  time  ago  a  valued  correspondent  wrote  me  that  he  had  lost  in 
the  mails  a  couple  of  my  dividend  checks — checks  which  had  been 


SIXTEENTH    NATIONAL    BANK. 

BOSTON 4jl|JU.xJU^    1  a 18QO. 

hi   consideration  of  the  c^>^.,J1b_(l>a_VL    X>oJLo<i_A<v^oJL  Bank,  of  Boston, 

ha^^ng  issued  to Sb.cx.A,J-jJ.  iB.  ^oJJLo.xl^<.,  x^  TBA^xJiio^jo.,  X.  ^. 

two  duplicate  checks  for  ten  dollars  each,   said  checks  being  for 

JSjcl.   3^  J<jlj\-kjS^jlj</^  jqJL  joJujOl»_o.  JLa_o^C payable  to  the  order  of 

3ia-A,oLiLi  Hi.  KoJ1x^..^aC the  said ^<x_:oJ.^  TB.  3C>JULq^C 

doth  hereby  promise  to  hold  said  Sixteenth  National  Bank  harmless  from  any 
and  all  loss,  cost  or  damage  which  may  be  incurred  by  reason  of  its  having  to 
pay  the  original  checks,  it  being  claimed  that  the  said  original  checks  are  lost. 

Signed,  fbo....J.^   TB.    3LJLLo^. 


Fonii  01. 
made  payable  to  order  and  duly  endorsed  back  to  me  for  collection. 
They  had  been  lost  more  than  a  month,  and  so  it  was  reasonable 


A    CHAPTER    ON    CHECKS.  243 

for  the  loser  to  make  the  appUcatiou  foi-  the  new  cheeks.  Knowing 
the  systematic  character  of  my  con-espondent  I  stopped  payment  of 
the  original  checks  and  at  once  sent  him  the  duplicates,  simply  saying 
to  hun  that  I  should  be  pleased  to  have  him  incorporate  in  his 
acknowledgement  the  customary  guarantee.  This  he  did,  giving  me 
a  filled-out  form  (see  Form  61),  which  I  consider  a  good  one  to  use 
under  the  same  circumstances. 

This  transaction  at  once  called  to  the  mind  of  myself  and  officers  a 
query  of  long  standing  regarding  our  post  office  administration :  Why 
is  it  that  the  postmasters  of  the  period  do  not  heed  the  instructions 
that  every  careful  bank  has  printed  in  the  corner  of  all  its  mailed 
envelopes,  and  which  read  as  follows: 

Jf  not  called  for  in  5  diiys  return,  to  [here  follows  name  of   tlie  bank]. 

For  many  years  I  have  been  cognizant  of  frequently-recurring  losses 
of  letters  thus  stamped  that  have  without  doubt  been  caused  in  almost 
all  cases  by  the  misdirection  of  the  letters  by  my  officers;  and  yet  it 
has  been  exceedingly  rare  for  me  to  find  the  corner  stamp  of  any 
account.  The  letters  seldom  come  back  from  the  post  offices  in  which 
they  are  held  under  a  wrong  direction;  and,  in  due  course  of  time, 
we  are  forced  to  begin  the  tedious  work  of  getting  duplicates  for  its 
lost  contents. 

In  some  flagrant  cases  of  postal  neglect  of  the  character  in  question, 
which  I  have  followed  up  and  investigated,  I  have  written  to  the 
Postmaster-General  for  an  explanation  of  these  failures  to  carry  out 
instructions.  The  invariable  reply  has  been  that  all  postmasters  are 
rigidly  instructed  to  obey  the  corner  stamp,  and  that  the  department 
requested  immediate  notice  of  any  violation  of  that  plain  duty. 

CERTIFICATES  OF  DEPOSIT. 
These  are  practically  a  bank's  check  on  itself ;  and  their  issue  in 
payment  of  an  obligation,  or  when  based  upon  non-interest  paying 
deposits,  is,  of  course,  a  source  of  direct  profit  to  a  bank.  Many  of 
them  are  liable  to  remain  outstanding  a  long  time ;  and  the  certificate 
of  deposit  account  of  some  of  our  large  city  banks,  made  up  of  the 
aggregate  of  these  items,  is  oftentimes  an  amount  which  is  looked  upon 
with  no  little  satisfaction  by  tlie  managers.  There  are  one  or  two 
points  relative  to  the  issue  of  these  miscellaneous  certificates  which  bank 
officers  should  keep  closely  in  mind.  Deposits  can  be  taken  from 
entire  strangers  for  any  amounts,  even  the  smallest,  and  certificates 
issued  thereon  with  entire  safety  if  these  points  are  carefully  attended 
to.  A  good  blank  certificate  form  must  be  used — good  in  its  manner 
of  getting  up,  good  in  the  way  of  filling  up,  and  good  as  far  as  the 
paper  is  concerned.  A  bank  which  fails  m  giving  proper  attention 
to  these  points  may  thereby  inflict  direct  loss  upon  itself,  or  loss  upon 
innocent  holders  of  these  certificates,  which  may  be,  and  in  many 
cases  has  been,  thrown  back  upon  the  issuing  bank.  For,  if  there  is 
anything  about  the  issued  certificates  that  encourages  fraud,  in  the 


244  PKACTICAL    BANKING. 

■way  of  raising  their  aiuounts,  etc.,  eoninioii  law  and  eoiuuioa  sense 
will  place  the  loss  arismg  thereby  upon  the  careless  bank. 

In  issuing  certificates  payable  to  strangers,  take  their  signatures 
upon  the  margin  of  the  certificate  book,  so  that,  when  the  certificates 
come  home  for  redemption,  the  endorsement  may  be  compared  with 
this  origmal  signature,  if  it  seems  necessary. 

Also,  make  it  an  iron  rule  to  have  every  returned  certificate  checked 
ofi;  with  its  original  margin  to  see  if  it  agrees  in  amount.  By  doing 
this,  absolute  safety  is  obtained  against  paying  certificates  which  have 
been  raised.  There  is  no  other  method  which  will  insure  this  safety; 
for  raising  can  now  be  done  with  such  skill,  on  almost  any  paper, 
as  to  absolutely  defy  direct  detection. 

Of  course  every  properly  managed  bank  has  a  ledger  account  of 
certificates  of  deposit  issued,  which  is  a  full  record  of  the  amounts 
and  names  of  all  certificates  issued,  together  with  dates  and  numbers. 
Returning  certificates  can  be  compared  with  this  record  as  they 
present  themselves  througli  clearing  and  over  the  bank  counter  before 
they  are  cashed ;  but  to  my  mind  the  more  convenient  way  to  guard 
against  the  danger  of  being  defrauded  by  raised  certificates  is  the  one 
I  have  before  suggested — that  of  prompt  comparison  with  the  stubs. 
I  have  also  suggested  that  the  signatures  of  the  payees  of  certificates 
be  taken  at  the  time  of  the  issue  of  the  vouchers,  so  that,  m  this  way, 
help  may  be  furnished  to  the  Tellers  in  the  matter  of  identification 
■when  the  payees  present  the  certificates  for  redemption.  But  I  do  not 
mean,  by  this  suggestion,  to  indicate  that  in  this,  or  any  other  ease, 
resemblance  of  signatures  is  to  be  considered  final  and  satisfactory. 

There  are  so-called  experts  who  hold  themselves  in  readiness  to 
settle  very  weighty  matters — even  those  of  reputation  and  life  and 
death — by  the  testimony  of  a  man's  handwriting.  But  the  expertest 
experts  of  the  day,  in  the  matter  in  question — the  experienced  Paying- 
Tellers  of  our  banks — are  the  last  persons  willing  to  swear  away  a 
man's  life  or  good  name  on  judgment  made  up  from  the  study  of 
disputed  signatures.  Handwriting  evidence  is  good  collateral  testi- 
mony; but  it  is  not  testimony  of  the  iron-clad  class. 

I  have  in  mind  several  quite  ingenious  persons  with  a  talent  for 
unitating  signatures,  who  can  write  your  name  so  that  you  would  find 
it  hard  to  disown  it  if  brought  casually  to  your  notice  unaccompanied 
with  circumstances  which  might  lead  you  to  doubt  its  genuineness. 

There  is  a  curious  feature  connected  with  the  issue  of  demand, 
non-interest-paying  certificates  by  banks  of  high  standing,  particularly 
those  located  in  large  places.  And  this  is  the  fact  that  there  are 
always  outstanding,  upon  the  books  of  such  banks,  very  many  of  these 
vouchers  of  quite  an  old  date  and  of  considerable  amounts. 

There  seems  to  be  a  fairly  good-sized  class  of  individuals  who 
appear  to  be  undecided  what  to  do  with  their  money;  and  .some  of 
these  seem  to  be  in  the  habit  of  taking  long  years  to  come  to  a  decision, 


A    CHAPTER   ON    CHECKS.  245 

if  we  may  judge  from  the  certificate  of  deposit  accounts  of  some  of  our 
old  banks. 

ENDORSERS  AND  ENDORSEMENTS. 

The  endorsers  of  a  check  stand  in  a  promissory-note  relation  to  it. 
To  hold  them  on  a  check  which  is  dishonored,  a  demand  and  notice — 
a  regular  protest  —  is  necessary.  Due  diligence  must  be  used  in 
making  the  demand  and  in  sending  the  notices  to  the  endorsers. 
Broadly  speaking,  a  clieck  is  always  good  against  the  drawer.  Yet 
here  is  an  exception.  If,  by  want  of  exercise  of  due  diligence  in 
collecting,  the  drawer  suffers — loses  something — he  may  clauu  damages 
from  the  careless  holder.  I  have  known  of  a  case  where  a  man  gave 
his  check  for  1^5,000  to  a  party,  who  carried  it  in  his  pocket  for  some 
days.  During  that  time  the  bank  upon  which  the  check  was  di-awn 
failed,  and  in  failing  locked  up  for  a  small  dividend  the  entire  balance 
of  the  party  who  had  draAvn  the  check  in  question.  Had  the  check 
been  presented  at  once  it  would  have  been  paid;  as  it  turned  out,  it 
was  never  paid.     Verdict :  Careless  holder  loses. 

A  bank  may  demand  an  endorsement  of  a  cheek  payable  to  order 
before  certification.  A  bank  may  refuse  to  certify  for  an  unidentified 
endorser.  Banks  may  demand  identification  of  the  holder  of  endorsed 
bearer-checks. 

In  endorsing  it  is  always  best  to  write  across  the  back  of  the  check, 
draft,  etc.,  rather  than  lengthwise.  By  so  doing  the  vouchers  are  left 
in  better  form  for  the  affixing  of  other  ealled-for  names;  and,  further, 
such  a  location  of  the  endorsement  is  in  accordance  with  well-estab- 
lished business  custom  in  this  matter,  an4  seems  to  bind  the  name 
more  strongly  to  the  form  and  figures  of  the  paper.  The  Teller  who 
cashes  the  endorsed  checks  expects  to  find  the  payee's  name  thus 
placed,  and  it  seems  to  him  and  to  everybody  else  better  placed  than  if 
sprawled  lengthwise  on  the  document.  In  endorsing,  one  should 
ahvays  gravitate  towards  the  top  of  the  check  if  there  is  any  proba- 
bility that  the  paper  is  to  travel  further  and  bear  moie  endorsements. 
Thus,  when  a  bank  issues  to  its  customers  checks  which  are  payable  to 
and  endorsed  by  its  Teller,  the  Teller's  countersign  should  be  well  up 
towards  the  top  of  the  paper.  It  is  easy,  and  also  important,  to 
recollect  that  the  top  of  the  back  of  a  check  is  its  left  face.  In  an 
ambitious  manual  for  business  men  published  in  this  country  I  find 
the  following  bad  advice  in  regard  to  making  endorsements: 

Ahvays  endorse  a  check  just  as  it  appears  on  the  face.  For  instance,  if  the  check 
is  payable  to"G.  Read"  endorse  "G.  Read;"  if  to  "Geo.  Read"  endorse  "Geo. 
Read  ;"  if  to  "  George  F.  Read  "  endorse  "  George  F.  Read."  If  the  spelling  of  the 
name  on  the  face  of  the  check  is  wi'ong  endorse  first  just  as  the  face  appears  and  below 
it  the  proper  way.  For  instance,  the  check  is  payable  on  face  to  "  George  Reade ;" 
endorse  "  George  Reade,"  and  below  this  first  endorsement  write  what  it  should  have 
been,  "George  Read." 

No  person  should  endorse  a  check  that  is  supposed  to  be  his — to  be 
made  payable  to  him — in  any  other  way  than  by  writing  his  o^vn  name 


246  PRACTICAL   BAXKING. 

— his  legal  name,  spelled  in  the  right  and  proper  manner.  It  matters 
not  that  the  name  may  be  spelled  differently — wrongly — in  the  face  of 
the  check.  He  should  allow  the  error  to  go  no  further — should  give 
it  no  countenance.  If  the  payer  of  the  cheek  is  satisfied  he  is  paying 
it  to  the  right  person  he  does  not  wish  a  wrong  name — a  name, 
perhaps,  that  does  not  really  have  any  relation  to  the  paper  upon 
whose  back  it  is  put.  If  the  check  is  to  go  further  through  the 
exchanges,  a  guarantee  of  the  endorsement  of  the  payee  will  be  all 
that  is  necessary  to  make  it  regularly  negotiable  and  satisfactory. 
THE   USE    OF    STAMPED   ENDORSEMENTS. 

An  authorized  stamped  endoi-sement  is  as  binding  as  a  written  one. 
Nevertheless,  there  are  to  be  found  among  our  bankers  and  business 
men  those  who  have  a  prejudice  against  the  stamped  signature,  and  it 
is  almost  impossible  to  obtahi  their  acceptance  of  it. 

But  the  use  of  the  stamp  is  daily  becoming  more  and  more  conmion, 
and  law  and  common  sense  sustain  it.  The  Aveak  point  about  a 
stamped  endorsement  is  that  it  cannot,  like  the  written  signature,  bear 
that  sUent  testimony  of  genuineness  which  handwriting  always  gives. 
In  case  of  contention,  positive  proof  of  the  genuineness  of  the  stamp 
must  be  established.  Where  the  signature  is  a  written  one  it  may,  in 
some  instances,  prove  itself  by  its  face  appearance,  though  it  must  be 
acknowledged  that  expert  testimony  in  the  matter  of  handwriting  is 
apparently  growing  more  and  more  out  of  favor.  In  getting  up  a 
stamped  signature  the  practice  of  engraving  and  printing  fac  similes 
is  very  generally  indulge(*  in.  The  result  is,  perhaps,  more  tasteful 
and  unpressive  than  that  reached  in  making  a  simple  type  stamp  to 
print  the  name  in  use;  Dut  the  imitation  is  no  more  binding  and 
authoritative  than  the  plain  type. 

Some  of  the  banks  in  Boston,  Philadelphia  and  other  cities  refuse 
to  accept  stamped  endorsements  upon  the  backs  of  checks  received 
through  the  Clearing-House  in  the  daily  course  of  settlements.  In 
New  York  the  use  of  such  stamped  endorsements  is  universal.  No 
bank  there  thinks  of  refusing  them.  I  hold  that  a  stamped 
endorsement  is  just  as  good  as  a  wi-itten  one,  if  made  by  the  same 
authority;  and  in  these  home  interchanges  through  clearing,  where  it 
is  easy  to  prove  reception  of  the  check  through  proper  avenues  of  circu- 
lation, there  is  little  or  no  danger  in  the  use  of  the  printed  endorsement. 

But  I  recommend  the  written  endorsement  as  far  safer  for  use  in 
the  case  of  transmission  of  out-of-town  coUections. 

ENDORSEMENTS  BY  TREASURERS. 

Here  is  a  point  in  check  endor.sing  and  paying  that  is  not  often 
alluded  to,  but  which  is  of  a  good  deal  of  importance,  since  it  shows 
that  some  improper  and  misleading  practices  prevail  among  business 
men  who  are  holding  positions  of  considerable  responsibility. 

The  Paying-Tellers  of  our  banks  are  being  constantly  called  upon 


A    CHAPTEK    CN    CHECKS. 


24? 


to  cash  cheeks  payable  to  order  of  companies— corporations — of  all 
sorts.  Such  checks  require,  of  course,  the  endorsement  of  those 
co:npanies.  But  they  are  often  found  coming  forward  for  the  cash, 
bearing  upon  their  backs  the  simple  endorsement  of  some  individual, 
who  has  trailed  after  his  name  the  word  Treasurer  without  any  speeifi- 
catiou  of  what  he  is  Treasurer  of. 

Now,  it  should  be  generally  understood — advertised — ^that  such  an 
endorsement  as  this  is  irregular  and  unsatisfactory. 

The  payee  of  the  check  is  a  specifie  company,  and  that  company 

should  endorse  the  check — should  endorse  it  in  about  this  manner, 

though  the  form  may  be  varied  to  suit  individual  tastes: 

New   York  i^and  Blast  Company 

by 

Peter  Smith,   Treasurer 

It,  instead  of  so  endorsing  it,  Mr.  Smith,  who  may  also  be  the 
Treasurer  of  the  First  Church,  at  Mount  Holly,  or  the  Springvale 
Horse  Railway  Company,  simply  puts,  on  the  back  of  the  check, 
"Peier  Smith,  Treasurer, ^^  who  is  to  say  in  what  Treasurer  capacity 
his  name  stands  there  ? 

Individuahsm  should  have  the  least  possible  prominence  in  the 
matter  of  check  drawing,  and  in  the  business  of  conducting  corres- 
pondence, forwarding  collections,  etc.,  etc.,  where  corporations  are 
concerned — that  is,  being  directly  dealt  with. 

In  sending  a  letter  to  the  Fourteenth  National  Bank,  New  York, 
of  which  Mr.  Robert  Jones  may  happen  at  the  present  moment  to  be 
Cashier,  address  the  letter  Fourteenth  National  Bank,  and  not  R. 
Jones,  Cashier ;  and  in  endorsing  all  to-be-forwarded  collections  follow 
out  the  same  principles. 

Individuals  are  somewhat  evanescent ;  corporations  have  long  lives, 
and  seldom  change  their  names. 

Here  is  another  case  where  the  objection  arises  from  a  fault  of  an 
exactly  opposite  nature. 

The  check  was  neatly  and  correctly  drawn,  and  a  good  check  as  far 
as  its  face  was  concerned.     Here  is  a/ac  simile  of  it  (see  Form  62). 


/(^OO 


Dolls 


Cts 


Boston... .^^(^i^.  ^<D,  188 


OLD  BOSTON^ATIONALBANK. 


Payt 


To  the  Cashier. 


8^ 


^_^  ,  <^7~^ or  order 

^LJl?:L/y:yC^ <?^^  Dollars 
OS^T^^^' 


■'^3:<^^'6«^ 


Form  Li'2. 

But  the  Teller  brought  it  to  me,  stating  that  he  had  sent  it  through 
clearing  to  the  bank  upon  which  it  was  drawn,  and  that  the  bank  had 


248 


PRACTICAL   BAXKIXG. 


returned  it  to  him  saying,  that  it  would  not  pay  it  unless  I  furnished 
it  with  a  guarantee  of  its  endorsement.  Turning  to  the  back  of  the 
cheek,  to  find  out  what  was  objectionable  about  the  paper,  I  found  an 
endorsement  of  this  character  (see  Form  63) : 


Form  63. 

The  obnoxious  "  signature  ''  was  the  ''  Jones  Despatch  Company,"  and 
there  can  be  few  more  objectionable  ways  of  endorsing  than  the  one 
that  had  been  adopted  by  the  said  Despatch  Company ;  and  the  drawee 
bank  Avas  certainly  justified  in  asking  for  a  guarantee  of  it. 

This  unwise  custom  of  putting  on  as  an  endorsement,  or  using  in 
any  place  as  a  signature,  the  name  of  a  Company,  without  in  the  least 
individualizing  it  by  signing  by  an  agent,  Treasurer,  or  attorney,  seems 
to  have  been  upon  the  increase  of  late,  and  is  actually  adopted  by  some 
very  experienced  business  parties.  The  practice  cannot  be  too  strongly 
condemned.  Doubtless  the  "Jones  Despatch  Company,"  in  the  case 
just  given,  would  be  held  responsible  for  such  an  endorsement  as  we 
have  described  if  they  had  authorized  some  one  thus  to  sign  for 
them.  But  the  awkward  feature  of  the  business  lies  in  the  fact  that 
in  case  of  any  dispute  or  complication  it  might  be  difficult  to  prove  the 
correctness  of  the  "signature" — difficult  to  establish  its  authorship 
and  its  authority.  On  the  other  hand,  if  the  Despatch  Company 
endorsed  by  its  Treasurer  thus,  "Jones  Despatch  Company,  by  R. 
Jones,  Treasurer,"  the  check  would  pass  along  through  settlements 
without  question  as  far  as  its  endorsement  was  concerned.  Every 
properly  organized  company  has  a  Treasurer,  and  that  Treasurer  is  the 
only  proper  party  to  endorse  and  promise  for  it,  unless  he  is  absent,  in 
which  case  it  is  usual  for  the  President  of  the  company  to  sign  in  liis 
place.  In  the  by-laws  of  corporations  the  provision  is  generally  made 
that  the  President  shall  sign  in  place  of  the  Treasurer  in  ease  of  need. 

GUARANTEES  OP  ENDORSEMENTS. 
The  question  of  whether  or  not  special  guarantees  of  what  may  be 
termed  "irregular"  endorsements  of  checks  are  to  be  required,  as  the 
checks  pass  along  from  bank  to  bank,  ii;i  their  process  of  collection  of 
the  l)ank  upon  which  they  are  drawn,  is  one  Avhich  is  being  continually 
discussed  in  banking  circles.     The  point  raised  is,  in  brief,  this:    Is 


A    CHAPTER    0:S    CHECKS. 


249 


the  bank  in  New  York,  -whieh  sends  to  me,  in  Boston,  a  elieck  on  a 
Boston  bank  for  collection  with  endorsements  as  follows  (see  Forms 
64  and  65),  responsible,  without  giving  lue  a  special  guarantee  in  the 
premises  for  tlie  correctness  of  the  endorsements  that  precede  its  own 
last  endorsement  ? 


^^ 


S-^Zq^zTT-  Boston, 

Nationa 


Pay  to  the  order  of 


■c^iiiyr^'!:^^.^ 


Form  65. 

In  some  cities,  notably  in  New  York  and  San  Francisco,  most,  if 
not  all  the  banks,  take  the  ground  that,  in  making  an  endorsement  for 
collection  on  a  check  as  shown  in  the  above  form,  they  guarantee — are 
fully  held  for  the  endorsements  above  them. 

On  the  other  hand  I  find  that  Boston  banks  will  not  pay  a  check  of 
this  character  unless  it  is  accompanied  by  a  special  guarantee  of  the 
correctness  of  the  "irregular"  endorsements — a  guarantee  which  must 
be  furnished  by  the  last  bank  through  which  it  comes  to  them  for 
collection. 

The  embarrassments  of  the  situation  regarding  this  question  arise 
from  the  fact  that  there  has  not  been,  so  fai\  what  may  be  termed  a 
direct  and  positive  legal  settlement  of  the  question  Ave  are  discussing. 
But  it  would  seem  as  if  common  law  and  common  sense  would  support 
the  view  that  the  last  endorser  is  responsible  for  the  endorsements  above 


250  PRACTICAL  BANKING. 

lilm.  If  such  is  the  case — if  he  is  held  witliout  positively  so  express- 
ing himself  by  a  special  guarantee — there  can  be  little  objection  on  his 
part  to  gi\ing  a  special  guarantee,  -when  parties  paying  the  check  take 
a  different  view  and  ask  for  the  special  guarantee. 

To  be  pugnacious  over  inconsequential  points  is  not,  certainly,  in 
the  case  of  busy  and  ever-harrassed  bankers,  the  part  of  wisdom. 
They  should  always  be  ready  to  make  concessions  for  the  sake  of 
easing  the  friction  of  banking  machinery  where  such  concessions  can 
be  made  without  the  sacrifice  of  principle  or  the  assumption  of  risks. 

Some  English  bankers  and  financial  writers  are  in  the  habit  of 
using  a — to  us — rather  unfamiliar  word  in  this  connection. 

Not  long  since  I  received  a  check  for  collection  from  a  Canadian 
bank  which  bore  upon  its  back  an  irregular  endorsement — an  endorse- 
ment which,  to  use  an  expression  common  with  us,  needed  a  guarantee 
from  the  correspondent  through  whom  it  had  passed  to  us  for  collection. 
This  correspondent  made  the  needed  guarantee  in  tliis  novel  form : 

Now,  what  is  the  difference  between  the  words  endorsement  and 
endorsation  ?  "N\Tiy  had  this  Canadian  bank  dropped  the  former  term 
and  adopted  the  latter?  There  is  a  decided  difference,  and  in  this 
difference  the  Canadian  found  a  reason  for  allowing  endorsation  to 
step  into  the  place  usually  occupied  by  endorsement. 

Endorsation  means  act  of  endorsing ;  the  endorsement  is  the  result. 

There  seemed  to  the  Canadian  no  need  of  guaranteeing  the  endorse- 
ment.    There  it  stood,  finished  and  entirely  legible. 

But  the  endorsation — the  right  of  the  party  who  made  this  irregular 
endorsement  in  this  precise  shape  to  do  this  act — ^was  what  needed 
behind  it  the  regular  guarantee. 

And,  though  this  form  of  "endorsation  guaranteed "  may  not  come 
into  general  use  in  premises  such  as  we  have  described,  it  cannot  be 
denied  the  merit  of  being,  after  all,  strictly  correct. 

GUARANTEEING  AN  ABSENT  ENDORSEMENT. 
There  is  another  technical  form  of  guaranteeing  the  back  of  checks, 
which  is  in  common  use  among  bankers,  that  sounds  strangely,  but 
which  is,  after  all,  quite  difficult  to  improve  upon.  A  check  reaches 
a  bank  through  responsible  parties,  who  are  not  its  payees,  without 
beai'ing  the  needed  payee's  endorsement.  The  drawees  conclude  to 
pay  without  demanding  the  absent  endorsement,  since  such  a  demand 
would  cause  con.siderable  delay  and  trouble;  they  decide  to  cash  the 
check  if  the  presentorw-ill  '^guarantee  the  absence  of  the  endorsements 
This  is  the  form  to  which  we  allude  and  it  would  be  affixed  as  follows: 

the  signature  being  that  of  the  presenter.  Over-particular  bankers 
sometimes  say  that  such  an  expression  of  the  guarantee  is  absurd,  since 


A    CHAPTER    ON    CHECKS.  251 

the  absence  iti  question  is  clear  enough  without  any  guarantees.  They 
say  that  what  is  wanted  is  a  guarantee  against  loss  and  trouble  which 
may  result  from  the  absence  of  the  endorsement. 

The  form  of  guarantee  they  have  in  mind  is  one  which  is  very  diffi- 
cult of  expression,  and  the  condensed  form  we  have  given  means  just 
what  they  asked  for — that  the  guaranior  will  hold  himself  liable  for 
any  loss  or  damage  which  may  be  the  outcome  of  the  irregularity  we 
have  described — an  irregularity  which  is  simply  the  absence  of  a  proper 
endorsement. 

Thus  this  common  form,  though  technical  in  character,  covers  the 
ground  fully,  and  the  correctness  of  its  use  is  well  established. 

In  many  cases  the  need  for  such  a  guarantee  may  be  avoided. 

To  illustrate.  A  man  in  Boston  receiv^ed  in  payment  of  a  bill  of 
merchandise  a  check  upon  a  bank  in  New  York  for  §.500.  The  payee 
of  the  check,  a  merchant  in  Kansas,  had  mailed  it  to  his  Boston 
creditor  without  endorsing  it.  The  Boston  dealer  endorsed  the  check, 
guaranteeing  the  absent  endorsement,  deposited  it  in  a  bank,  and  the 
bank  repeated  the  guarantee  of  the  absent  name  and  forwarded  it  to 
its  New  York  corresponding  bank  for  collection  and  credit.  This  New 
York  bank  returned  the  cheek,  saying  that  the  check  could  not  be 
collected  unless  properly  endorsed  by  the  payee;  that  guarantees  of 
absent  endorsements  would  not  be  taken  by  New  York  banks.  In  the 
present  case,  where  the  depositors  of  the  check  were  perfectly  respon- 
sible parties,  and  the  check  was  all  right  except  in  the  point  of  payee's 
endorsement,  it  seemed  an  awkward  thing  to  send  the  paper  away 
back  to  Kansas  for  rectification.  So  the  Boston  bank  asked  the 
depositor  of  the  check  to  endorse  the  check  for  the  payee  as  follows: 
''John  Jones  [Jones  was  the  payee]  by  Smith  &  Roberts"  [Smith  & 
Roberts  being  the  Boston  depositors  of  the  check].  After  this  endorse- 
ment the  Boston  bank  put  on  its  "  endorsement  correct"  and  sent  the 
check  forward  for  collection,  and  the  New  York  bank  collected  it  and 
passed  it  to  its  credit. 

Again,  a  concern  receives  from  correspondents  remittances  of 
checks  payable  to  its  own  order — checks  which  it  is,  of  course,  desirable 
to  have  passed  at  once  into  its  bank  for  collection  and  credit.  But 
there  happens  to  be  no  member  of  the  payee  house  at  home  to  endorse 
these  checks.  What  shall  be  done  ?  The  employees  of  the  house  in 
question  may  not  be  in  any  immediate  need  of  the  funds  represented 
by  these  checks,  but  they  rightly  wish  to  have  them  put  at  once  on 
the  path  of  collection  and  credit  for  account  of  their  firm. 

Let  the  clerks  pass  them  at  once  into  their  bank,  marked  upon 
their  backs  "Deposited  for  the  credit  of  the  payees;"  and,  to  avoid  the 
bother  of  an  absent  endorsement,  let  them  endorse  them  for  their  firm 
— their  firm  by  themselves.  As  the  checks  are  to  be  credited  to  the 
payees,  and  as  the  proceeds  of  these  checks,  when  once  pas.sed  to  credit 
of  payees,  cannot  be  drawn  from  the  bank  except  on  draft  of  the 


252  PRACTICAL  BAXKING. 

payees,  or  their  authorized  attorney,  it  becomes  perfectly  safe  and 
reguhir  for  the  bank  receiving  them  *^o  guarantee  these  informal 
endorsements,  and  pass  them  along  for  collection. 

Perhaps  the  circumstances  are  such  that  it  is  not  possible  to  take 
advantage  of  either  of  the  suggestions  I  have  made.  I  recall  such  a 
case  and  the  way  it  was  handled. 

The  check  was  drawn  on  a  Boston  bank  for  620,000.  It  was  sent  to 
me,  in  Boston,  for  collection  by  a  bank  in  New  York.  The  New  York 
bank  had  received  it  from  a  corresponding  bank  in  Toronto,  Canada. 
It  lacked  the  endorsement  of  the  original  payee,  a  house  in  Toronto. 
Unable,  of  course,  to  collect  without  this  missing  endorsement,  or 
some  responsible  guarantee  in  its  absence,  I  at  once  wired  to  the  New 
Y'ork  bank  for  instructions,  and  asked  whether  I  should  guarantee  the 
absent  endorsement  or  return  the  check.  The  New  Y^ork  bank,  a 
prompt  and  most  systematic  correspondent,  at  once  answered  as  follows : 

"  Obtain  a  certification  of  the  checlc,  and  then  send  it  to  the  Toronto  bank,  ^\ith  a 
request  that  they  obtain  the  endorsement  and  return  the  check  direct  to  you  for  col- 
lection for  our  account." 

This  is  good  banking — a  way  out  of  an  error  that  could  not  be 
improved  upon.  By  this  method  of  handling  the  check  a  risk  was 
avoided  by  obtaining  the  early  certification  of  "good  when  properly 
endorsed,"  and  much  time  saved  by  sending  the  lame  check  direct  to 
Toronto. 

In  this  illustrative  case  a  very  important  duty  is  made  prominent — 
in  fact,  two  duties.  One  is  the  necessity  of  wiring  for  instructions  in 
critical  and  unusual  circumstances;  the  other  the  duty  of  always 
obtaining  the  certification  of  the  kind  I  have  named  where  checks  are 
refused  simply  on  account  of  missing  or  informal  endorsement. 

Banks  sometimes  forget  to  ask  for  this  certification — a  certification 
which  no  bank  ought  to  refuse  under  the  circumstances  described. 
QUALIFIED  ENDORSEMENTS. 

Wliile  it  is  a  good  plan  to  make  every  check  payable  to  the  order 
of  some  one,  it  is  not  a  good  idea  to  have  them  so  drawn  as  to  seem 
to  require  what  may  be  termed  a  qtialified  endorsement  —  that  is,  by 
accompanying  the  order  to  pay  by  any  statement  or  description  which 
would  make  the  payee  furnish  something  more  than  his  simple 
endorsement.  I  am  sorry  to  say  that  this  practice  is  quite  too  common 
with  check-drawers.     Here  is  an  illustration  of  this  point: 

I  draw  a  check  upon  a  New  York  bank,  written  payable  to  the 
order  of  some  other  bank,  with  the  additional  expression,  "for  credit 
of  Smith  &  Jones,  of  Chicago,"  and  remit  the  said  check  to  the  bank 
named  as  payee.  This  last-named  bank,  in  receiving  and  collecting 
the  check  so  made  payable,  ought,  to  be  strictly  correct,  to  endorse 
it  just  as  it  is  made  payable;  but  it  does  not  do  so;  and  so  it  is  better 
not  to  have  it  so  drawn. 

Perhaps  you  send  a  cheek  to  a  New  York  publisher  in  payment  of 


A    CHAPTER    ON    CHECKS.  253 

your  subscription  to  his  journal,  and  on  its  face  write  after  his  name 
as  payee  "For  subscription  to  Jan.  1,  1891." 

When  he  deposits  tliat  check  for  collection  he  simply  endorses  it 
with  his  name,  saying  nothing  about  the  purpose  for  which  it  was 
remitted  him.  To  be  strictly  correct,  he  should  endorse  it  as  it  is  filled 
out;  but  he  does  not  do  so;  and,  consequently,  it  ought  not  to  have 
been  so  filled  up. 

All  tliis  descriptive  and  qualifying  matter  should  be  put  in  tlie 
letter  accompanying  the  check,  and  not  in  the  body  of  the  check  itself. 

There  is  another  reason  for  avoiding  these  descriptive  matters  in 
drawing  a  check.  The  payee  who  receives  a  check  drawn  to  his  order 
in  payment  of  a  bill,  or  for  services  rendered,  which  matter  is  fully 
written  out  in  the  body  of  the  check,  may  not  wish  to  have  the  fact 
thu^  expressed — fully  known  to  every  one  through  whom,  the  check 
passes  on  its  way  to  collection  and  to  the  bank  upon  which  it  is  drawn. 

The  following  incident,  which  transpired  in  one  of  our  National 
banks  a  while  ago,  amusingly  illustrates  the  complications  which 
may  arise  under  such  objectionable  orders  to  pay.  The  man  presented 
the  check  at  the  desk  of  the  Paying-Teller  and  demanded  that  it  be 
cashed.  It  had  been  originally  drawn  in  a  proper  manner,  but  the 
payee  had  endorsed  it  over  to  the  holder,  who  was  now  trying  to  collect 
it,  in  something  after  this  style : 

Pay  to  the  order  of  Uenry  Broxon  in  full  for  all  demands  against  me  for 
services  rendered  by  him. 

Mr.  Brown  had,  according  to  his  own  statement,  deliberately  pasted 
a  piece  of  white  paper  over  that  portion  of  the  order  to  pay  which 
embodied  the  receipt  in  full  for  services  rendered,  and  on  that  adher- 
ing paper  had  made  the  plain  endorsement  of  Henry  Brown. 

The  check  clearly  showed  that  the  paper  had  been  thus  pasted  on, 
and  the  presenter  honestly  explained  what  was  under  it,  saying  that 
he  was  unwilling  to  sign  the  receipt  which  he  had  thus  covered. 

The  Teller  refused  to  pay  the  check,  claiming  that  it  had  not  been 
endorsed  at  all — that  the  payee  had  simply  endorsed  another  piece  of 
paper  and  pasted  it  on  the  check. 

The  holder  of  the  check  took  it  away  and  subsequently  returned 
with  it  with  the  added  paper  removed  and  his  own  endorsement  upon 
the  cheek,  but  the  objectionable  receipt  crossed  out  by  his  pen. 

As  the  check  was  but  a  small  one,  the  Teller  finally  concluded  to 
pay  it  in  this  mutilated  condition — to  take  the  risk  of  its  settlement, 
though  he  would  have  been  perfectly  justified  in  refusing  to  cash  it  in 
its  altered  condition. 

STOPPING  CHECKS. 

A  full  description  of  the  check  had  been  left  with  the  bank  (its 
number,  date,  amount,  and  endorsements,  as  far  as  known),  accom- 
panied by  a  written  order  to  stop  or  refuse  its  payment,  the  person 
making  this  request   having  discovered  that  it  had  been  stolen  or 


254  PRACTICAL    BAXKIXG. 

miscarried,  and  wisliiug  to  make  it  valueless  in  the  hands  of  ^\Tong 
parties.  At  the  present  time,  when  such  vast  numbers  of  checlss  are 
drawn,  and  almost  all  money  settlements  are  made  by  the  use  of  checks, 
■while  it  is  easy  for  a  bank  to  receive  and  place  on  file  a  notice  such  as 
the  one  described,  it  is  exceedingly  difficult  for  the  bank  to  undertake 
to  insure  stopping  the  payment  of  a  genuine  check.  This  matter 
is  daily  growing  more  and  more  embarrassing  to  banks,  especially  in 
large  clearing  cities,  where  checks  center  representing  the  business  of 
an  innuense  circuit.  Careful  banks  attempt  to  hedge  by  distinctly 
declaring,  when  requests  to  stop  payments  are  presented,  that  they 
will  endeavor  to  obey  the  "injunction,"  but  cannot  promise  to  do  so. 
In  some  banks  notices  are  conspicuously  posted  reading  as  follows: 
"While  this  bank  will  use  due  diligence,  it  will  not  be  responsible  for 
checks  paid,  although  payment  of  the  same  has  been  stopped."  But 
waivers  of  this  description  have  no  legal  force.  An  order  from  the 
drawer  of  a  check  not  to  pay  it  is  as  binding  on  a  bank  as  one  ordering 
the  bank  to  pay  it — as  the  check  itself  before  it  is  stopped — provided 
both  orders  are  drawn  in  a  formal  and  proper  manner.  The  only  way 
out  of  the  difficulty  is,  that  if  it  becomes  evident  that  banks  cannot 
safely  conduct  business  under  laws  and  customs  binding  them  to  stop 
checks,  legislation  must  be  called  in  to  help  them  by  enactments  that 
shall  relieve  them  of  the  responsibility  in  question.  Wlien  London 
banks  could  no  longer  get  through  their  daily  mass  of  check  paying 
under  laws  and  customs  requiring  them  to  procure  identifications  in 
cases  of  order  cheeks,  Parliament  relieved  them  by  a  law  permitting 
them  to  pay  without  identifications.  The  legislation  we  suggest  would 
work  a  similar  benefit  in  this  country. 

CANCELING   CHECKS. 

After  paying  and  charging  a  check,  banks  have  a  custom  of  canceling 
them  by  punching  or  making  some  eccentric  cut  through  their  face. 

The  old  style  of  driving  a  punch  through  a  pile  of  paid  checks,  to 
signify  that  they  had  done  their  work,  is  not  a  style  which  can  be 
recommended.  When  the  Book-keeper  puts  daylight  through  liis 
day's  checks  in  this  radical  manner,  he  inflicts  a  disfigurement  upon 
the  checks  which  may  be  a  source  of  danger.  He  thus  hacks  a  piece 
out  of  every  check,  which  piece,  though  it  may  bear  a  date  or  a  figure 
of  the  first  importance,  goes  into  the  waste-basket,  and  can  be  seen  no 
more.  I  have  known  of  aggravating  cuts  from  checks  that  have  thus 
made  mutilations  which  have  bothered  banks  in  law-suits,  etc. 

An  eccentric  cut,  which  removes  no  portion  of  the  check,  is  the 
most  proper  cancellation,  and  the  one  now  most  in  use  in  our  large 
banks. 

All  paid  checks  should  be  spindled,  or  in  some  way  cancelled  by 
Tellers,  before  they  pass  to  Book-keepers  to  be  charged  and  to  receive 
their  final  and  more  thorough  cancellation. 

Failure  to  remember  the  necessity  for  Tellers'  cancellations  has,  in 


A    CHAPTER    ON    CHECKS.  255 

at  least  one  case,  given  a  defaulting  Book-keeper  a  clear  chance  to  use 
paid  checks  a  second  time. 

I  have  been  shown  by  a  bank  President,  who  has  an  excellent  head 
for  arranging  bank  machinery,  the  arrangement  in  his  bank  for  can- 
celling paid  and  charged  checks. 

His  Paying-Teller  is  supplied  with  a  neat  little  hand  punch,  with 
which  he  cuts,  from  each  paid  check  which  passes  through  his  depart- 
ment, a  cancelling  mark,  which  cut  is  distinguishable  from  that  made 
by  any  fellow-officer,  since  it  is  his  own  initial.  The  Receiving-Teller 
and  the  Book-keeper  in  this  bank  have  each  also,  their  separate  initial 
punches;  and  the  use  of  these  little  hand-clippers  prevents  the  objec- 
tionable mutilation  of  cheeks  of  which  I  have  spoken,  since,  in  using 
them,  the  officers  look  to  see  where  they  cut. 

In  matters  of  this  sort  there  is  a  right  way  and  a  wrong  way  to  do 
things,  and.  though  the  work  may  seem  of  a  very  trifling  character,  it 
often  ceases  to  be  of  trifling  importance  in  its  results. 

A  final  point  as  to  cancellation  is  of  value,  for  the  reason  that  bank 
Tellers  and  Book-keepers  sometimes  cancel  checks  by  mistake.  They 
will,  by  error,  put  their  punch  or  cutter  through  them  when  they  have 
not  been  paid  and  are  not  to  be  paid  by  them  for  the  reason  that  they 
are  drawn  upon  some  other  bank.  The  cancelling  is  generally  con- 
sidered an  evidence  of  payment  or  a  proof  that  a  check  has  reached 
the  end  of  its  route.  It  is,  therefore,  the  plain  duty  of  any  bank  which 
has  punched  a  check  wrongfully  to  make  at  once,  before  it  has  been 
passed  along  to  the  bank  upon  which  it  was  drawn,  a  formal  record 
upon  the  cheek,  and  directly  under  the  punch,  that  the  punching  has 
been  done  by  mistake.  This  record  should  be  made  by  the  officer  who 
has  made  the  cancellation. 

Whenever  a  check  reaches  a  bank  upon  which  it  has  been  drawn 
with  a  punch  or  cut  in  it  that  has  been  made,  as  I  have  described,  by 
error,  and  yet  has  no  certification  upon  it  of  who  has  made  the  error, 
it  is  the  custom  and  duty  of  the  bank  upon  which  it  is  drawn  and 
which  is  about  paying  it  to  send  it  back  to  the  bank  or  party  from 
whom  it  has  been  received  in  the  process  of  collection,  with  a  demand 
that  the  cancellation  error  shall  be  guaranteed  or  duly  certified  as 
having  been  made  by  mistake. 

The  question  very  naturally  arises  here  whether  or  not  a  bank  upon 
wliich  a  cheek  is  drawn  would  be  justified  in  refusing  to  pay  it  if  it 
came  to  it  mutilated  in  the  manner  described,  provided  it  could  not 
secure  from  any  previous  holder  the  guarantee  or  certification  men- 
tioned. We  reply  that,  if  the  check  and  its  presentation  were  all 
right  in  other  respects,  no  bank  could  be  justified  in  flatly  refusing  to 
pay  it  .simply  on  the  ground  that  it  had  a  cut  or  a  hole  in  it. 


256 


PKACTICA.L,    BANKI^'G. 


CHAPTER    XVI. 

NOTES    AND    DRAFTS. 

A  promissory  note  is  a  documentary  promise  to  pay.  An  old 
English  definition  of  this  instrument  states  it  to  be  a  writing  which 
contains  a  promise  of  the  payment  of  money  or  the  deUvery  of  property 
to  another  at,  or  before,  a  time  specified,  in  consideration  of  vahie 
received  by  the  promisor.  From  a  practical  banking  stand-point 
exceptions  would  be  taken  to  one  feature  of  this  definition — that 
which  speaks  of  the  payment  "on  or  before,''  since  the  holder  of  a 
time  note  cannot  legally  be  obliged  to  accept  payment  before  it  is  due. 
This  question  seldom  comes  up  between  payer  and  payee,  yet  it  is 
well  to  understand  its  bearings  in  case  it  should  arise.  A  common 
style  of  promissory  note  (see  Form  66),  which  must,  of  course,  vary  in 
form  according  to  circumstances,  is  the  following : 


•VmAajL-  ^  .Xa: 


u^' 


y7i>f\AAliAchrjaA±A  ^-H^oJj'^h  rjJjJ^;-tluA  r^h^ 


OMid 


m.  MQ) , 


/yiro. 


Form  6G. 

In  explaining  its  leading  features,  their  bearings,  and  the  rights 
and  duties  of  the  parties,  the  order  of  the  statements  set  forth  in  the 
note  offers  a  good  arrangement  for  the  order  of  our  explanations. 

THE  PLACE   WHERE  A    XOTE  IS  DATED. 

This  is  of  far  less  importance  than  is  generally  supposed.  A  note 
is  always  payable  where  the  promisor  has  a  legal  place  of  business, 
unless  it  is  otherwise  specified  in  the  body  of  the  note,  no  matter 
where  it  may  be  dated.  Thus,  a  promise  to  pay  !§5,000,  dated  in  New 
York,  and  signed  by  a  man  who  is  a  merchant  in  Boston,  is  payable  in 
Boston,  unless  the  body  of  the  paper  contains  some  provision  of  a  con- 
trary character,  though  the  word  Boston  may  not  appear  on  the  note. 

Notes  that  pass  from  hand  to  hand  and  through  banks  for  collection 
or  discount,  bearing  specific  places  of  date  but  no  specific  places  of 


NOTES    AND    DRAFTS.  257 

payment,  are  generally  supposed  to  be  signed,  and  so  payable,  in  the 
places  where  the  promisors  do  business.  Quite  often  they  are  not  thus 
executed,  and  risks  and  misunderstandings  occur  from  a  want  of  a 
clear  knowledge  of  the  facts  we  have  just  explained. 

Notes  should  always  be  written  in  their  body  payable  at  some 
definite  place.  In  such  a  case  the  place  wliere  they  are  dated  appears 
to  be  what  it  really  is  —  of  little  account. 

THE  DATE  OF  A   NOTE. 

The  date  of  a  note  is,  of  course,  a  matter  of  the  first  importance, 
or  it  is  likely  to  be  so,  for  the  time  of  maturity  usually  runs  from  it, 
and  interest,  where  interest  accrues,  is  generally  calculated  from  it. 
But  it  is  a  much  better  plan  to  draw  up  notes  and  time  drafts  payable 
at  a  certain  fixed  time  in  an  unmistakable  way  in  the  body  of  the 
documents,  instead  of  making  them  payable  in  so  many  months  or 
so  many  days  fi*om  date. 

Thus,  I  would  insert  the  maturing  date  directly  in  the  body  of  the 
note  in  this  way:  "For  value  received,  I  promise  to  pay  on  the  6th 
day  of  March,"  etc. — drawing  the  paper,  in  matter  of  date  and  other 
points,  as  in  the  form  presented  above. 

If  one  desired  to  state  it  still  more  exactly  he  would  say,  "on  the 
9th  day  of  March,  fixed  "  or  "  without  grace. " 

Promisors  and  payees  of  notes  and  acceptances  are  quite  sure  to 
know  when  they  wish  the  j^aper  they  have  in  hand  to  fall  due,  and 
there  can  be  no  prettier  way  of  making  the  maturity  clear  and  promi- 
nent than  by  setting  it  down  at  the  start  in  plain  black  and  white. 

The  term  ' '  fixed, "  as  sometimes  used  in  this  note  form,  is  an  unmis- 
takable one  in  both  law  and  custom.  Fixed  means  just  what  it  says — 
positively  at  that  time  without  any  grace. 

These  suggested  forms  would  save  trouble  in  computing  maturities 
of  paper,  which,  under  the  common  form  of  making  up  time  paper,  is 
a  ready  source  of  error  to  inexpert  reckoners. 

There  are  several  leading  facts  relative  to  the  dates  of  notes-of-hand 
which  should  here  be  stated.  It  is  safe  to  say  that  a  note  made  and 
issued  on  Sunday  is  an  illegal  document,  and  is  therefore  void.  In 
practical  bankmg,  notes  are  discounted  and  collected  without  thought 
of,  or  reference  to,  the  possibilities  of  the  fact  that  the  paper  may  have 
about  it  such  a  taint ;  but  every  banker  ought  to  understand  that  there 
might  arise,  under  some  circumstances,  what  may  be  termed  "  Sunday 
difficulties  "  about  notes.  A  note  may  be  dated  on  Sunday  and  not  be 
open  to  any  objection  on  that  account.  In  averaging  pajTuents  and 
issuing  promises  to  pay  of  various  dates,  based  upon  the  result  of 
averagmg  operations,  dates  of  paper  are  often  thrown  into  Sunday, 
and  such  a  location  of  a  date  of  a  promissory  note  is  not  ' '  illegal  or 
irregular."  Sunday  is,  of  course,  a  regular  working  day,  as  far  as 
maturity  of  paper  and  interest  are  concerned,  yet  careful  calculators 
are  often  found  studying  up  plans  for  avoiding  throwing  their  maturi- 


258  rUACTICAL    BAXKIJfG. 

ties  on  a  Sunday,  since  by  such  they  lose  a  day,  as  the  Sunday  note 
must,  by  the  statutes  of  many  States,  be  paid  the  day  before. 

Notes  are  sometimes  unintentionally  issued  without  a  date.  In  case 
of  the  decease  of  a  party  who  has  given  a  note  in  this  way,  the  holder 
may  prove  the  date  and  insert  it  himself.  In  case  the  signer  still  lives, 
it  is  better  to  hunt  him  up  and  get  him  to  put  in  the  figures  himself. 

Notes  whose  dates  have  been  altered  are  often  turning  up  in  banks 
and  elsewhere.  If  the  alterations  have  been  made  at  the  right  time 
and  by  the  right  person  they  are  not  legally  viewed  as  blemishes. 

FACTS  RELATING    TO   FIGURES. 

The  figures  representing  the  amount  for  which  the  note  is  given  are 
almost  always  placed  where  they  are  shown  in  the  form.  The  amount 
in  a  promissory  note  can,  in  this  country,  be  legally  and  regularly 
given  in  figures,  wTiting  or  cipher,  but  there  are  countries  where  the 
statutes  demand  of  a  note-of-hand  that  its  amount  shall  be  expressed 
both  in  writing  and  figures. 

Our  present  common  note-of-hand  form  is  of  very  ancient  origin. 
All  its  points  are  fully  described  and  discussed  in  old  French  law 
books.  The  oldest  French  legal  authorities  take  the  ground,  which  is 
held  Avitli  us  to-day,  that  where  the  amount  of  a  note  is  expressed  in 
figures  and  wa'iting,  and  there  is  a  variation  between  the  two,  the 
writing  shall  take  precedence. 

The  practical  view  of  such  variations,  and  the  action  taken  under 
them  by  the  Discount  or  Collection  Clerk  of  the  bank  of  the  period, 
is  for  either  of  them,  when  he  finds  a  note  of  this  incoherent  character 
working  its  way  into  the  files,  to  stop  it  immediately  and  send  in 
search  of  some  reliable  parties  to  it  who  can  tell  for  just  what  amount 
it  should  have  been  drawn. 

Bank  officers  treat  checks  which  do  not  agree  in  writing  and 
figures  just  as  they  treat  these  variable  notes— refuse  to  have  anything 
to  do  with  them,  until  corrected,  if  they  can  by  any  means  find  parties 
to  them  who  are  able  to  make  them  straight. 

FOR    VALUE  RECEIVED. 

Tliis  ambiguous  opening  phrase,  inserted  in  all  negotiable  notes, 
and  meaning  nothing,  since  it  does  not  state  who  has  received  the 
value,  is  one  of  those  Continental  red-tape  forms,  allied  to  the  senseless 
use  of  seals  and  antique  expressions  in  Law  Latin  with  which  many  of 
our  modern  business  and  finance  papers  are  encumbered.  It  may  be 
well  enough  to  keep  up  its  use,  since  it  looks  well  in  a  note  and  adds 
to  its  dignified  and  formal  air;  but  it  should  be  clearly  understood 
that  its  presence  in  a  promissory  note  is  by  no  means  a  legal  necessity ; 
nor  is  it  there  by  the  command  of  a  custom  which  has  any  binding 
power.  An  honest  promise  to  pay  will  go  alone  without  the  addition 
or  prefix  of  any  such  acknowledgment,  and  can  be  enforced  as  well 
without  it  as  with  it.  In  these  days  of  rafts  of  accommodation  paper 
it  is  a  fact  that  many  good  notes  are  signed  where  no  value  has  been 


NOTES    AND    DRAFTS.  259 

received;  and,  as  all  classes  of  paper  adopt  the  fashion  of  using  the 
words  in  question,  it  follows  that,  in  many  cases,  they  are  mere  fiction. 

PROMISE   TO  PAY. 

It  is  not  easy  to  misunderstand  the  force  and  meaning  of  tliis 
expression.  In  the  negotiable  note  the  promise  to  pay  must  be  uncon- 
ditional. It  cannot  be  made  to  depend  upon  any  contingency  whatever. 
For  the  note  or  acceptance  is  deemed  a  negotiable  instrument  only 
when  it  is  so  fi-amed  that  it  can  be  transferred  either  for  collection  or 
by  sale  or  discount  from  one  holder  to  another — when  it  is  made  in  due 
form  for  circulation  as  a  collectible  voucher  in  any  hands  to  which  it 
may  be  regularly  passed.  To  possess  all  these  characteristics  it  must 
be  made  payable,  and  that  unconditionally,  in  money.  If  a  note  is 
written  payable  in  cash,  or  particularly  named  articles  of  merchandise, 
as,  for  instance,  in  "good  merchantable  timber,  at  market  price,"  it 
becomes  a  contract,  and  is  not  entitled  to  the  name  of  commercial, 
negotiable  paper. 

For  a  condensed  abstract  definition  of  the  leading  features  of 
negotiable  paper  there  is  nothing  better  existing  than  that  given  by 
Daniels  when  he  says  (Vol.  I. ,  page  56)  that  in  order  to  possess  the 
quality  of  negotiability  the  paper  should  afford  upon  its  face  every 
element  necessary  to  fix  its  value.  It  is  because  paper,  to  be  negotiable, 
must  possess  this  important  characteristic,  that  it  becomes  a  question 
whether  notes  and  acceptances  written  "payable  in  New  York 
exchange,"  or  any  other  exchange,  can  be  construed  to  be  really  and 
properly  negotiable.  For  this  reason  there  are  intelligent  bank 
managers  who  take  the  stand  that  they  will  not  discount  such  paper. 

TO    THE  ORDER    OF. 

This  expression  is  also  absolutely  necessary  to  a  note's  negotiability. 
The  payee — the  party  to  whose  order  it  is  payable,  and  who  becomes 
its  endorser  when  negotiated — cannot  be  legally  called  upon  to  meet 
the  note  himself  until  a  formal  and  positive  demand  upon  the  signer 
of  the  prom^ise  to  pay  has  failed  to  secure  a  redemption  of  the  promise. 
Such  demand,  accompanied  by  due  notice  to  the  endorser,  makes  Avhat 
the  banks  and  notaries  term  their  "protest"  of  a  note — an  operation 
usually  costing  the  bank  in  notarial  fees  from  ^1. 50  to  $2  on  each  note. 

Here  are  a  few  leading  points  about  protesting  which  are  worthy 
of  being  noted.  Demanding  and  notifying,  constituting  what  is 
termed  protesting,  is  best  done  by  a  sworn  Notary  Public,  whose 
broad  seal-signature  and  formal  documents  are  accepted  in  Court  as 
prima  facie  evidence  of  the  facts  stated.  When  the  services  of  a 
Notary  cannot  be  obtained  to  do  work  of  this  character  it  can  be 
placed  in  the  hands  of  any  person.  Such  unofficial  protestor  must  be 
very  careful  about  all  his  acts  and  records,  and  must  be  ready,  in  case 
his  doings  are  called  into  Court  or  questioned  in  any  important  way, 
to  furnish  witnesses  who  can  confii-m  his  acts  by  their  testimony. 

In  all  protesting,  due  diligence  must  be  used  in  making  a  demand 


260  PRACTICAL    BANKING. 

upon  the  promisor  at  his  place  of  business,  if  he  has  one,  or  at  his 
residence,  if  he  has  no  place  of  business,  or  at  the  point  where  he  has 
made  the  note  payable.  "Where  a  promisor  makes  his  note  payable  at 
a  bank  or  any  other  specific  point  the  demand  must  be  made  there 
and  not  at  his  residence  or  place  of  business,  though  these  last  may  be 
in  the  immediate  vicinity.  This  demand  must  be  made  on  the  day  of 
the  maturity  of  the  dishonored  note,  during  the  business  hours  of  the 
promisor,  or  of  the  ofBce  where  the  note  is  payable. 

Notices  to  endorser  or  endorsers  must  be  sent  at  once ;  if  ' '  out  of 
town  "  must  be  mailed  as  soon  as  the  day  following  the  demand. 

Where  a  note  bears  many  endorsements,  all  are  mailed  to  the  last 
one,  and  he  in  turn  mails  to  those  above  him,  a  day  being  given  for 
each  re-maihng.  It  is  perfectly  legal  and  regular  for  a  Notary  in 
Boston,  protesting  a  note  due  there,  with  many  endorsements,  the  last 
one  of  whom  is  a  New  York  party,  and  all  the  rest  well-known  Boston 
business  men,  to  mail  all  the  notices  to  the  last  endorser  in  New  York, 
who  must  in  his  turn  mail  back  to  the  one  above  him  in  Boston. 

These  are  only  a  few  leading  points  about  protesting  an  endorsed 
note.     Manuals  devoted  to  the  business  are  in  all  good  bank  libraries. 

DOLLARS. 

The  promissory  note  before  us  is  payable  in  "dollars."  What  are 
they,  from  the  stand-point  of  the  American  banker  and  merchant? 

The  Bland  Act  made  eighty-five  cents  or  so  an  American  dollar, 
such  as  is  set  forth  in  the  promissory  note  we  have  in  hand ;  and  this 
Bland  Act,  under  which  we  have  nominally  assumed  specie  payment, 
upsets  any  theory  that  the  country  has  resumed  that  specie  paynnent 
which  in  war  times  we  suspended.  We  have  assumed  payment  in  silver, 
but  not  resumed  specie  payments  after  the  old-time  understanding. 
Thus  the  matter  is  understood  and  reckoned  upon  in  the  settlement  of 
the  exchanges  of  the  world's  conuiierce. 

Resumption  of  specie  payment  has  always  meant,  the  financial 
world  over,  resumption  of  the  payment  of  gold  instead  of  paper — gold 
where  any  amount  is  concerned,  and  silver,  etc.,  in  change;  and  this  is 
what  resumption  really  means  to-day.  Practically  most  notes  are  paid 
by  checks,  certified  and  otherwise,  which  are  the  representatives  of  the 
dollars  we  have  been  describing. 

The  man  who  owes  a  note  payable  in  dollars  may  pay  it  in  various 
ways,  but  these  all  amount  to  about  the  same  thing,  viewed  from  the 
debtor's  point  of  view.  If  the  note  lies  lodged  in  a  National  bank  for 
collection,  the  promisor  thereof  has  a  right  to  pay  it  in  National  bank 
bills,  for  every  National  bank  is  obliged  to  receive,  in  payment  of  debts 
due  it,  bills  of  any  National  bank.  In  times  when  National  bank-notes, 
particularly  small  ones,  have  been  in  over-supply  among  the  banks, 
they  have  sometmies  attempted  to  make  the  point  that  the  payment  of 
collection  notes — notes  left  in  their  hands  by  owning  depositors — was 
not  the  payment  of  a  debt  due  the  bank,  and  that,  consequently,  they 


NOTES    AND    DRAFTS. 


261 


were  not  obliged  to  receive  otlier  tlian  lawful  money  in  settlement  of 
such  collections.  But  the  point  is  a  strained  one  and  cannot  be  main- 
tained. Promisors  have  tlie  right  to  pay  their  "dollars"  in  lawful 
money,  no  matter  whether  the  promises  to  pay  are  in  the  hands  of 
banks  or  individuals.  Legal-tenders,  United  States  notes,  gold  and 
silver,  with  qualifications,  are  lawful  money.  Here  is  a  concise  table 
of  lawful  money  (see  Form  67) : 


COLD. 

SILVER. 

Denominations. 

Weight, 
Orains. 

Amount  for 

which  a 
Legal-Tender. 

Denominations. 

Weight, 
Grains. 

Amount  for 

which  a 
Legal-Tender. 

Double  Eagle... 
Eagle 

51C. 

258. 

139. 
77A 
64.5 
25.8 

Gold  coin  of 
all  denomina- 
tions is  a  legal- 
tender  for  any 
amount. 

Standard  Dollars 
Trade  Dollars.. . . 

Dollars 

Half  Dollars 

Quarter  Dollars. 

Twenty  cents 

Dimes 

Half-dimes 

Three  cents 

413,5 

430. 

413.5 

193.9 
96.45 
77.16 
38.58 
19.39 
11.53 

Unlimited. 
Not  Ic^al-t'der 

Half  Eagle 

Three  Dollars. . . 
Quarter  Eagle. . 
Dollars 

Unlimited. 
Ten  dollars. 
Ten  dollars. 

MINOR. 

Ten  dollars. 
Five  dollars. 

Five  cents 

77.16 

30. 

96. 

48. 

Twenty-flve  cts 
Twenty-five  cts 
Twenty-five  cts 
Twenty-flve  cts 

Five  dollars. 

Three  cents 

Two  cents 

Cents 

Mutilated  Silver  and  Minor  Coins  are 
refused,  as  there  is  no  provision  for  their 

Form  67. 

It  is  important  to  note  liere  that  this  standard  silver  coin,  the 
standard  * '  dollar, "  which  is  often  sarcastically  termed  by  financiers  the 
"buzzard  "  dollar,  is  inferior  in  intrinsic  value  to  a  trade  dollar,  which 
cannot  be  forced  upon  a  payee  in  settlement  of  a  note  payable  in  dollars. 

PAYABLE  AT. 

The  place  where  a  note  is  payable  is  one  of  its  most  important 
features.  All  parties  to  a  note  are  greatly  convenienced  by  its  having 
a  place  of  payment  clearly  and  specifically  named  in  its  body.  The 
best  way  is,  if  possible,  to  make  a  bank  that  place  of  payment ;  for  a 
bank  is  a  central  locality  for  settlements  of  this  sort,  is  always  ready 
during  banking  hours  for  the  work  of  receiving  payment,  and  has  the 
machinery  and  understands  the  methods  required  for  the  business.  It 
is  not  a  good  practice  for  a  merchant  to  make  his  notes  payable  at  his 
own  store  or  counting-room.  He  is  likely  to  embarrass  himself  by  so 
doing;  for,  in  case  he  fails  to  find  where  his  note  is  held  at  the  time  of 
its  maturity — receives  no  notice  from  the  bank  or  individual  of  its  place 
of  deposit  for  collection — he  will  be  obliged  to  draw  his  money  from  the 
bank  and  hold  it  in  hand  during  all  the  business  hours  of  the  day  of  its 
maturity.  On  the  other  hand,  if  he  has  made  his  jiaper  payable  at  his 
bank,  he  has  nothing  to  do  but  to  put  his  bank  in  funds  to  meet  it  and 
order  them  to  do  so,  for  no  one  holding  it  can  protest  it  until  it  has  there 
been  presented  and  turned  away  dishonored. 

In  Clearing-House  cities  it  is  particularly  advantageous  for  banks 
and  note-makers  that  every  note  shall  be  made  payable  at  a  bank, 
since  in  such  cases  they  can  be  smoothly  and  conveniently  charged  in 


263 


PRACTICAL    BAXKIXG. 


through  the  Clearing-House  at  the  morning  settlements  after  the 
common  bank  check  style.  The  note  made  payable  at  a  bank  is  ordin- 
arily notified  there ;  yet,  if  the  maker  of  a  note  thus  drawn  wishes  to 
be  notified  personally,  he  has  only  to  minute  a  request  of  this  sort  m 
the  margin  of  his  note  when  he  executes  it. 

THE  SIGXA  TVRE  OF  A   XOTE. 

It  is  exceedingly  desirable  that  this  shall  be  so  expressed  that  it  can 
be  readily  distinguished.  There  is  no  banker  of  experience  who  will 
not  be  able  to  recall  with  regret  the  weary  waste  of  time  that  he  and 
his  officers  have  been  caused  by  the  almost  undecipherable  signatures 
that  frequently  turn  up  in  banks.  There  are  few  parties  who  are 
called  upon  to  sign  notes  who  cannot,  if  they  so  please,  affix  their 
names  in  a  readable  style.  They  may  not  have  a  talent  for  elegant 
penmanship,  but,  if  they  aim  at  legibility  when  they  undertake  to 
write,  they  can  generally  make  characters  which  can  quickly  be  trans- 
lated by  the  Discount  or  Collection  Clerk.  The  signature  may  be 
made  with  a  pen,  a  pencil,  or,  in  fact,  with  anything  which  will  write, 
and,  of  course,  a  writing  fluid  of  any  hue  or  material.  A  note  can  be 
signed  by  mark,  properly  witnessed,  or  a  man's  initials  for  his  promise 
will  surely  bind  him.  A  note  may  even  not  be  signed  at  all,  or  may 
have  been  signed  with  an  ink  that  has  afterwards  entirely  fled,  yet  the 
demand  upon  it  shall  be  good  against  the  party  really  owing  upon  the 
note.  "Writing  is,  after  all,  merely  a  convenient  witness,  as  it  were, 
and  the  debtor  who  expects  to  escape  from  meeting  his  just  debts 
simply  because  that  witness  may  happen  to  be  absent,  in  case  of  a 
note,  for  instance,  will  find  that  other  testimony  may  be  summoned 
to  hold  him  to  his  promise. 

Where  a  man  wrote  a  note  in  liquidation  of  a  claim,  and  with 
fraudulent  intent  inserted  a  "not"  after  the  word  ''promise"  in  the 
note  he  signed — literally  promised  7iot  to  pay — the  swindle,  of  course, 
availed  Ixim  nothing. 

DRAFTS    AND    ACCEPTANCES. 
The  form  below  (see  Form  68)  of  an  accepted  draft  may  serve  as  a 
text  for  considering  points  relative  to  both  drafts  and  acceptances. 


■  J  '  '     '      ^- 


^M 


I  Hi  Mil  mil     -  ■ 


Form  68. 
In  the  matters  of  date,  signatures,  amount  in  figures  and  writing  and 


NOTES    AND    DRAFTS.  263 

endorsements,  the  draft  and  acceptance  are  under  cheek  and  prom- 
issory note  laws  already  referred  to. 

The  method  of  stating  the  maturity,  also,  may  be  .similar  to  that  I 
have  recommended  for  notes,  and  in  the  draft  shown  above  would 
read  "  Sept.  9th  after  date  pay  to." 

There  are  a  few  points  of  a  distinctive  character  relative  to  papers 
of  this  description  which  may  not  be  understood  by  all.  Both  before 
and  after  the  acceptance  of  a  draft  the  drawee  stands,  practically,  in 
the  same  relation  to  it  as  an  endorser.  This  answers  the  question  so 
often  raised  by  bank  officers,  ' "  Why  protest  this  draft,  since  it  has  no 
one  to  hold  but  the  drawer  ?"  To  legally  bind  the  drawer  of  an 
unaccepted  draft  care  must  be  used  in  its  presentation  for  acceptance, 
and  protest  demand  and  notices  served.  Drawees  have  twenty-four 
hours  in  which  to  decide  whether  or  not  they  will  accept  a  time  draft. 
But  when,  say  at  the  second  date  of  this  twenty-four  hours,  they  do 
accept,  their  acceptance  should  be  dated — if  the  form  of  the  draft 
calls  for  an  acceptance  date — from  the  date  of  its  presentation— that 
is,  back  to  the  time  when  they  first  saw  it. 

"When  a  draft  requiring  acceptance  meets  with  a  prompt  and 
decided  refusal  of  acceptance  on  its  presentation,  bank  officers  often 
ask  the  Casliier  whether  or  not  it  is  best  to  hold  the  paper  in  hand  the 
twenty-four  hours  or  give  it  once  to  a  notary  for  immediate  protest. 

Tliis  matter  has  two  aspects.  To  protest  at  once,  where  the  refusal 
has  been  flat,  gives  all  the  parties  to  the  draft,  back  of  the  drawee, 
the  advantage  of  the  earliest  possible  notice  of  its  dishonor,  an 
advantage,  in  some  instances,  of  considerable  value.  This  might  be 
particularly  the  case  where  the  draft  was  for  a  large  amount  and 
based  on  perishable  goods  which  the  consignee  was  refusing  and 
which  the  drawer  would  wish  to  take  in  hand  at  the  earliest  moment. 
On  the  other  hand  there  are  many  instances  where  drawees  who  have 
refysed  point  blank  to  accept  a  draft,  change  their  minds,  under 
influence  of  circumstances,  before  the  twenty-four  hotu's  are  up,  and 
finally  accept — accept  to  growl  over  a  protest  and  perhaps  to  refuse  to 
pay  it  altogether. 

The  decision  in  the  situation  in  question  must  be  left  to  be  decided 
by  the  bank  officer  by  circumstances  and  the  exercise  of  good  judgment. 

A  simple  protest  for  non-acceptance  of  a  time  draft  will  permit  of 
its  safe  return  to  the  owners.  There  is  no  positive  legal  need  that  it 
shall  also  be  protested  for  non-payment,  though  it  is  generally  a  safe 
custom  so  to  do. 

A  full  protest — the  filling  up  of  accompanying  notarial  blanks — is 
always  preferable  in  case  the  simple  protest  for  non-acceptance  is  made 
the  final  protest. 


2(J4  PRACTICAL,    BANKING. 


CHAPTER   XVn. 

THE   PRESIDENT   AND   DIRECTORS. 

Under  this  title  we  shall  consider  the  administrative  force  of  the 
bank,  and  very  properly  begin  with  their  election. 

Early  in  January  the  Cashiers  of  most  National  banks  -will  find  that 
they  have  on  their  hands  the  business  of  attending  to  the  manage- 
ment of  the  annual  meeting  of  their  shareholders.  At  these  meetings 
the  President  of  the  bank  presides  over  such  of  the  shareholders  as 
can  be  drummed  into  attendance,  and  the  Cashier  serves  as  clerk. 
Every  shareholder  is  entitled  to  one  vote  on  each  share  held  by  him. 
Shareholders  may  vote  by  proxies,  but  no  officer  of  a  bank  can  act  as 
a  proxy.  No  shareholder  whose  liability  on  his  shares  is  past  due  and 
unpaid  can  vote  on  them.  As  soon  as  the  shareholders  have  chosen 
the  Board  of  Directors  the  Cashier  should  at  once  formally  notify 
them  of  their  election  by  a  notice  either  on  a  postal  or  full-size  note 
like  the  following  (see  Form  69) : 


THE    FIRST    NATIONAL    BANK. 

Sir:  New  York  -  -  ^^<x^o-^u-cx^  <?  ._18C?0. 

At  a  meeting  of  the  Stockholders  of  this  Bank,  held  at  their  Banking 
Rooms  this  day,  you  "were  elected  a  Director  for  the  year  ensuing. 

You  are  requested  to  attend  a  special  meeting  cf  the  Directors  this 

day  at  - ^j^^jl. o'clock S*.  JVl for  the  purpose  of  organizing 

the  Board.  pgj.  order,  4-o-^v*--!^.  2).o^>.oLA^,  Cashier. 


Form  69. 

It  will  be  observed  that  this  notification  also  summons  the  Director- 
elect  to  a  meeting  of  the  Board  at  a  later  hour  of  the  same  day  for 
purposes  of  organization.  At  this  meeting  the  Directors  take  the  oath 
of  office,  a  Notary  Public  being  present  to  administer  and  record  this 
oath  because  he  can  do  the  work  in  the  most  formal  manner  and  attest 
with  his  imposing  seal.  The  Bank  Act  does  not  specify  the  manner 
of  administering  this  oath  to  Directors,  and  a  Justice  of  the  Peace  has, 
therefore,  full  qualifications  for  the  work. 

Here  is  the  form  of  oath  (see  Form  70)  required  by  the  National 
Bank  Act,  and  it  will  be  seen  to  be  quite  severe  in  its  declarations. 


THE    PRESIDENT    AND    DIKECTORS.  265 

It  is  required  that  every  Director,  when  elected,  shall  at  once  take  the 
following  oath. 


"  I,  the  11  ruler  signed,  Direcim'  of  The  ,  of         ,  of  the  State  of  , 

do  solemnly  swear  that  I  am  a  citizen  of  the  United  States  and  resident  of 
the  State  of  ,  and  that  I  will,  so  far  as  the  duty  devolves  on  me, 

diligently  and  honestly  administer  the  affairs  of  said  Bank;  and  tJuit  I 
will  not  knowingly  violate,  or  willingly  permit  to  be  violated,  any  of  the 
"provisions  of  the  Revised  Statutes  of  the  United  States  under  which  this 
Bank  has  been  organized;  and  that  I  am  the  bona  fide  owner,  in  m,y  own 
right,  of  th£  number  of  shares  of  stock  subscribed  by  me  or  standing  in  my 
name  on  the  books  of  tlie  said  Bank,  and  required  by  said  Revised  Statutes ; 
and  that  the  same  is  not  hypothecated  or  in  any  way  pledged  as  security 
for  any  loan  or  debt. 

Subscribed  and  sworn  to  this  day  of  ,  189  ,  before  tlie  undersigned, 
a  of  said  county. 


Form  70. 

Not  long  ago  I  had  some  little  conversation  with  an  able  merchant, 
who  had  for  many  years  been  a  Director  in  a  State  bank  which  had 
re-organized  under  the  National  system.  At  this  re-organization  he 
declined  to  continue  on  the  Board,  because  he  was  not  willing  to 
take  the  required  oath.  Many  who  are  less  sensitive  about  assuming 
such  obligations  are  often  quite  easy  in  their  way  of  livuig  up  to  them. 
They  lightly  sign  and  lightly  break  their  oaths  of  office. 

The  statement  in  the  oath  as  to  ovsnnership  of  stock,  refers  to  the 
requirement  of  the  National  Bank  Act  that  a  Director  shall  be  the 
owner  of  ten  shares  of  the  bank's  stock.  I  note  here  that  those  National 
banks  which  have  a  par  value  of  $50,  as  far  as  I  have  observed,  require 
their  Directors  to  hold,  for  a  qualifying  quota  of  stock,  20  shares  instead 
of  10,  although  there  seems  to  be  nothing  in  the  Bank  Act  requring 
that  they  should  hold  more  or  less  than  10  shares,  no  matter  what  the 
par  may  be.     In  this  matter  the  Bank  Act  seems  not  sufficiently  clear. 

The  Cashier  must  see  to  it  that  the  oaths  of  the  Directors  are  at 
once  forwarded  to  the  Comptroller.  The  Directors  are  not  qualified 
to  serve  until  they  have  been  sworn  in.  If  they  are  not  present  at 
the  first  regular  meeting  after  their  election  it  is  customary  for  the 
Cashier  to  send  his  Notary,  with  a  prepared  oath  form,  to  search  for 
them  at  their  places  of  business,  so  that  the  oaths  of  the  full  Board 
may  be  sent  to  the  Comptroller  at  once. 

Every  National  |j)ank  is  required  to  have  not  less  than  five  Directors. 
In  the  other  direction  there  is  no  lunit  to  the  number  of  Directors  a 
bank  may  have. 

The  Board,  at  its  lu-st  meeting,  chooses  one  of  its  number  as  Presi- 
dent and,  in  some  cases,  another  member  as  Vice-President. 
RESPONSIBILITIES    AND   DUTIES. 

No  man  is  obliged  to  be  a  bank  Director;  but  when  a  man  has 
assumed  such  a  position  he  is  under  absolute  obligations  to  attend  to 


266  PRACTICUi    BANKING. 

its  duties.  He  should  endeavor  to  attend  promptly  all  the  Board 
meetings,  should  try  to  make  himself  familiar  with  all  the  ways  of 
the  institution  in  his  charge,  and  should  take  a  close  personal  interest 
in  its  officers  and  their  metliods  of  discharging  their  duties. 

In  tiie  central  and  all  important  duty  of  looking  after  the  invest- 
ments of  the  bank,  he  should  never  forget  that  the  loan  in  his  charge 
is  not  the  loan  of  funds  belonging  to  the  Board  of  Directors,  but  the 
property  of  wards  in  his  charge — wards  who  are  often  helpless  Avidows 
and  orphans ;  and  he  should  never  favor  a  loan  or  a  discount  which  he 
would  not  make  were  he  individually  the  owner  of  the  entire  bank. 

Without  doubt  there  are  instances  where  parties  accept,  or  even 
seek,  positions  as  Directors  for  the  simple  purpose  of  adding  to  their 
own  personal  revenues  by  the  use  of  the  facilities  afforded  by  such 
positions  for  making  money  in  various  ways.  Such  instances  are, 
however,  rather  exceptional.  To  meet  such  abuses  Vermont  has 
recently  pa.ssed  a  law  which  is  a  good  example  for  other  States  to 
follow,  and  the  leading  features  of  whicli  might  well  be  copied  into  the 
National  Bank  Act.  The  law  in  question  prohibits,  under  severe 
penalty,  any  bank  Trustee,  Director,  or,  in  fact,  any  bank  employee, 
from  receiving  any  bonus,  commission,  or  any  consideration  whatever, 
from  borrowers  of  the  institution  with  which  tliey  are  connected. 

The  great  majority  of  the  members  of  these  Boards  are  men  of 
the  highest  business  character  who  have  achieved  success  in  finance 
or  manufactures,  or  some  other  leading  line  of  business,  and  who 
accept  the  positions  because  they  are  pleased  with  the  nature  of  the 
legitimate  duties  and  associations  belonging  to  them,  and  are  more 
than  willing  to  take  a  Director's  responsibility  in  consideration  of  the 
honorable  nature  of  the  position  and  the  opportunities  afforded  for 
doing  business  service. 

In  all  matters  that  have  to  do  with  the  policy  and  administration 
of  their  bank,  it  is  extremely  desirable  that  the  Board  of  Directors 
should  be  a  unit — a  harmonious  body  working  together,  as  one  man, 
towards  a  single  end,  and  that  end  the  best  interests  and  highest 
prosperity  of  the  bank  which  is  in  their  charge. 

Points  relative  to  the  business  of  the  bank  should  be  fully  discussed 
at  Directors'  meetings,  and  there  finally  settled.  At  these  meetings  all 
varying  views  should  be  presented.  Then  and  there  is  the  time  and 
place  for  the  expression  of  opinion  and  criticism.  And  after  a  con- 
clusion there  has  been  fairly  reached,  that  decision^as  far  as  practicable, 
should  be  accepted  and  loyally  supported  by  every  member  of  the 
Board. 

But  it  should  be  remarked  in  this  connection,  that  it  can  never  be 
expected  that  each  individual  member  of  any  given  Board  of  Bank 
Direction  shall  have  equal  influence  and  power  in  the  matter  of  the 
direction  of  the  affairs  of  their  bank.  It  will  always,  or  nearly  always, 
be  found  that  the  practical  v»'orking  of  the  Board  of  Direction  business 


THE    PRKSIDENT    AND    DIRECTORS.  267 

is  about  like  tliis :  Tliere  will  be  some  men  on  the  Board  who  are  so 
absorbed  by  their  own  private  business  matters  tliat  they  have  neither 
the  tune  nor  the  inclination  to  give  any  very  great  attention  to  tlie 
affairs  of  their  bank.  Such  Directors  are  inevitably  irregular  in  their 
attendance  at  Directors'  meetings,  and,  as  a  consequence,  cannot  be 
very  closely  acquainted  Avith  the  run  of  matters  at  the  bank.  They 
may  be  faitliful  and  able  business  men,  but  they  have  entered  the 
Board  of  Directors  with  the  tacit  understanding  that  the  Board  is  to 
have  only  a  small  share  of  their  business  talent. 

Then  outside  of  this  general  distinction  as  to  some  of  the  members 
of  Boards  of  Direction,  thero  is  that  difference  of  power  and  influence 
exerted  by  individual  Directors  wliieli  comes  from  existing  differences 
in  the  make-up  of  the  men  as  regards  tlieir  force,  persistence  and 
ability.  It  is  not  far  out  of  the  way  to  say  that  the  practical  workings 
of  the  average  Board  of  Bank  Directors  are  much  after  this  sort. 
When  first  thrown  togetlier  the  various  members  may  be  little 
acquainted  with  each  other's  business  habits,  talents  and  tastes. 
They  may,  for  a  time,  drift  along  in  rather  a  promiscuous  mannei*, 
but  before  long  it  is  apt  to  be  the  case  that  tlie  discovery  is  made  tliat 
one  of  their  number  is  by  nature,  education,  real  business  talent  and 
force  of  character  well  calculated  to  be  the  leading  man  among  them, 
and  not  at  all  unwilling  to  be  recognized  as  such.  It  is  rare  to  find  a 
Board  of  Bank  Directors  whicli  does  not  contain  at  least  one  member' 
who  is  recognized,  inside  and  outside  tlie  bank,  as  the  leading  spirit  of 

the  Board. 

FINANCE    COMMITTEES. 

Boards  of  Directors  are  in  the  habit  of  delegating  a  large  part  of 
their  management  to  a  Finance  Committee  made  up  of  three  or  four 
of  the  most  active  members  of  the  Board,  with  the  President  of  the 
Board  as  Chairman  ex-officlo.  Unquestionably  a  majority  of  banks  are 
' '  run  "  by  their  Finance  Committees.  The  by-laws  of  these  institu- 
tions usually  fully  define  the  powers  of  the  Finance  Committee,  and 
fi'om  time  to  time,  by  vote,  special  duties  are  thrown  upon  them — 
such,  perhaps,  as  the  purchase  or  sale  of  a  quantity  of  stock  or  bonds 
when  all  the  information  necessary  could  not  be  procured  for  the  full 
Board  and  yet  where  the  President  did  not  want  to  take  the  sole 
responsibility  of  a  decision.  This  important  committee  is  a  very  con- 
venient and  important  "institution"  in  every  systematically  managed 
bank. 

MEETINGS    AND    RECORDS. 

The  by-laws  of  a  bank  state  when  these  meetings  shall  be  held, 
what  number  of  Directors  shall  make  a  quorum  at  meetmgs,  etc.,  etc. 

As  regards  time  of  meetings,  the  banks  vary  widely.  The  range  is 
all  the  way  from  the  once-a-month  of  the  small  bank  in  the  country, 
with  a  Board  made  up  of  gentlemen  living  in  many  towns  in  the  dis- 
trict where  the  bank  is  located,  to  the  daily  meetings  of  the  Board  of 


268  PRACTICAL   BANKIXG. 

some  great  city  bank,  whose  capital,  deposits,  etc.,  are  heavy,  and 
■whose  business  has  a  wide  sweep. 

The  hours  of  meetings  also,  vary  just  as  widely;  for,  wliile  the  bank 
m  the  city  or  large  town  generally  calls  together  its  Directors  at  some 
hour  between  10  o'clock  A.  M.  and  2  or  3  o'clock  P.  M  ,  it  is  not 
uncommon  for  a  bank  in  the  back  country  to  hold  its  Directors' 
meetings  in  the  afternoon  or  evening  hours. 

The  general  routine  of  these  Directors'  meetings  is  of  this  sort : 

The  President,  if  present,  takes  the  chair;  if  the  President  is  absent 
some  Director — generally  the  senior  present,  where  there  is  no  Vice- 
President — assumes  his  place.  The  records  of  the  last  meeting  are 
read.  Then  a  statement  of  the  present  condition  of  the  bank  is  pre- 
sented. After  this  comes  a  consideration  of  applications  for  loans, 
renewals,  and.  of  any  business  matters  relative  to  the  bank  which  may 
be  pressing  for  attention. 

Tliese  general  business  matters  are  of  a  great  variety  of  character. 
New  officers  may  be  needed,  and  their  selection  must  be  attended  to. 
Salaries  may  need  revising.  Vacations  may  need  consideration.  Law- 
suits hanging  over  the  bank  may  have  to  be  talked  over.  The  aspect 
of  suspended  and  wavering  debts  to  the  bank  may  have  to  be  discussed. 

After  the  formal  business  of  the  Board,  comes  generally  a  very 
informal  and  semi-social  talk  over  matters  which  sometimes  have  a 
business  bearing  and  sometimes  have  not. 

The  records  of  these  Directors'  meetings  are  usually  made  by  the 
Cashier ;  sometimes  by  one  of  the  Board  acting  as  clerk  of  their  number. 

The  transactions  should  be  neatly  and  concisely  entered  in  a  suit- 
able book,  specially  prepared  for  the  purpose.  I  know  of  no  better 
iorm  of  making  this  record  than  this  (see  Form  71) : 

THE    TENTH     NATIONAL     BANK. 

MEETING   OF  THE  DIKECTOHS. 

MONDAY ^.o^A..A,oa.A-Y    lO       l.sQO. 

OoAJj^juvJU^    O^^JOvjOl      (J  V-Aju^^-JO^ytMi-Aj^ 

Gjttj..^  :  W.  RICE,  Cashier. 


THE    PRESIDENT    AND    DIRECTORS.  269 

For  feax  som^  junior  clerk  may  think  tliat  my  illustrative  vote 
should  have  had  a  broader  bearing,  I  will  quote  one  that  may  suit  him 
better  which  I  recently  noticed  on  the  record  of  a  large  city  bank 
under  date  of  a  little  over  thirty  years  ago :  ' '  Voted,  that  the  bank  be 
closed  on  Thursday  next  in  consequeiiae  of  the  great  Exhibition,  of 
Horses  and  other  Animals  to  take  place  on  that  day.'''' 

There  is  no  need  of  entering  upon  this  record  book  anything  but 
the  merest  facts  of  the  discounting,  since  all  the  details  relative  to 
those  transactions  will  be  found  in  their  proper  place  in  the  other 
books  of  the  bank. 

Officers  taking  vacations  (and  all  bank  officers  should  take  vacations) 
should  send  in  to  the  Board  meetings  their  applications  for  the  same, 
stating  proposed  length  of  absence ;  and  all  such  applications  should 
be  acted  upon  by  the  Board.  It  is  very  desirable  that  this  matter 
should  be  attended  to  in  this  formal  way,  since,  under  such  an  arrange- 
ment, the  bank  knows  just  where  its  officers  are,  and  fellow-clerks 
know  when  they  are  to  be  absent  and  when  they  are  expected  to 
return. 

A  majority  of  any  Board  of  Directors  usually  constitutes  a  quoriun 
for  the  transaction  of  general  business ;  any  number  present  a  quorum 
for  discounting,  since  all  discounting  is,  sooner  or  later,  pretty  sure  to 
pass  under  the  inspection  of  all  the  members  of  the  Board,  and  to  be 
reversed  and  annulled — the  paper  somehow  got  rid  of  if  possible — if 
any  member  of  the  Board  is  dissatisfied  with  it. 

This  matter  of  properly  writing  up  its  Board  records  is  a  legal 
obligation  upon  every  National  bank ;  and,  when  the  bank  Examiner 
comes  around,  he  will,  if  he  does  his  duty,  look  about  and  see  if  this 
work  is  rightly  done. 

DIRECTORS  IN  THEIR  RELATIONS  TO  THEIR  OFFICERS. 
I  have  just  said  that  a  man  should  never  accept  the  position  of  bank 
Director  unless  he  is  willing  to  accept  all  its  responsibilities  and  attend 
to  all  its  duties ;  and  among  a  Director's  highest  duties  and  responsi- 
bilities I  place  those  which  have  to  do  with  liis  official  relations  to  the 
bank's  employees.  The  Directors  have  a  right  to  demand  of  the  officers 
prompt,  efficient  and  most  honest  service.  On  the  other  hand,  the 
officers  have  a  right  to  expect  that  their  Directors,  who  stand  to  them  in 
the  immediate  light  of  employers,  should  take  not  only  an  employer's  but 
a  sort  of  parental,  interest  in  them.  They  should  endeavor  to  acquaint 
themselves  somewhat  with  the  out-of-bank  habits,  surroundings  and 
general  way  of  life  of  their  employees.  They  should  be  ready  to 
sympathize  with  them  in  those  troubles  which  come  to  all,  sooner  or 
later,  in  those  pleasures  and  successes  of  which  they  have  a  share,  and 
should  also  extend  to  them  as  far  as  practicable,  a  social — a  human 
recognition.  They  should  try  to  become  acquainted  with  their  way  of 
work  in  the  bank,  so  as  to  be  ready  to  encourage  and  commend  faith- 
fulness, and  to  discourage  and  correct  laxity  and  carelessness.     It  goes 


270  PRACTICAI/   BAISTKING. 

without  saying  that  they  should  he  ready  to  pay  generously,  promote 
constantly,  and  to  extend  to  the  worn  and  sick  liberal  furloughs,  and 
to  the  hard  working,  well-stated  vacations. 

And,  in  my  opinion,  the  great  majority  of  Boards  and  bank 
Directors  do  come  well  up  to  the  point  of  ''filling  this  bill." 

The  bank  officers  who  have  been  placed  in  positions  of  trust,  honor 
and  fair  remuneration,  by  Boards  of  Directors,  the  average  of  which 
are  of  the  character  I  have  described,  are  guilty  of  extreme  baseness 
and  ingratitude  when  they  violate  the  confidence  which  has  been 
reposed  in  them ;  for,  in  cases  of  defalcation  and  breaches  of  confidence, 
the  public  is  sure  to  throw  some  odium  upon  the  Boards  of  Directors 
which  have  been  chosen  to  select  and  supervise  those  officers,  though 
in  many  such  cases  the  Directors  have  done  all  that  men  in  their 
position  could  do;  for,  place  about  a  bank  officer  whatever  guards  and 
supervision  you  may,  when  once  he  has  been  put  in  a  position  of  trust 
and  confidence  he  can  be  a  scoundrel  and  steal  if  he  wishes  to  do  so. 
RELATIONS    OF   DIRECTORS    TO    DEALERS    WITH    THE    BANK. 

Their  most  important  relations  to  customers  have,  of  course,  to  do 
with  the  matter  of  making  loans  to  them — distributing  discounts. 

A  bank's  first  duty  is  to  extend  all  reasonable  accommodations  in 
the  way  of  loans  and  discounts  to  its  depositors,  whose  line  of  deposits 
makes  up  an  average  of  gross  deposits,  which  is  one  of  the  chief  loaning 
resources  of  the  bank. 

It  is  not  stretching  a  figure  to  say  that  good  depositors,  when  they 
borrow  money  of  their  bank,  borrow  their  own  money — in  general 
terms — pay  time  interest  upon  loans  of  money  which  they  have  lent 
their  bank  on  demand  free  of  interest. 

When  a  bank  is  in  funds  to  discount,  it  should  first  endeavor  to 
meet  the  wants  of  its  valuable  depositors ;  and,  when  this  has  been 
done,  it  is  time  enough  to  look  about  among  the  applications  of 
outsiders. 

The  position  of  bank  Director  is  certain  to  bring  to  its  possessor  one 
notable  embarrassment— he  is  sure  to  be  beset  by  frequent  requests  to 
use  his  influence  at  his  bank  to  secure  loans  for  friends  and  business 
acquaintances  which  he  cannot  accede  to.  I  need  only  to  hint  to  these 
friends  and  business  acquaintances  who  are  pressing  the  bank  Director 
for  loans  at  his  bank,  with  which  they  may  keep  no  account,  that  every 
bank  Board  is  made  up  of  many  }nen  with  many  minds;  and,  that, 
however  desirous  our  individual  Director  may  be  to  tide  over  the  cash 
wants  of  his  friends,  delicacy,  duty  and  other  very  material  obstacles 
may  often  make  him  powerless  to  do  anything  in  the  premises. 
SELECTION    OF    DIRECTORS. 

This  chapter  opens  with  a  description  of  the  routme  of  election  and 
organization  as  it  annually  occurs,  but  there  may  have  been  some 
preliminary  work  rendered  necessary  by  vacancies  in  the  Board  which 


THE    PRESIDENT    AXD    DIRECTORS.  271 

have  been  left  unfilled  until  the  regulai-  time  for  the  annual  election. 

It  is  always  .somewhat  difficult  to  find  just  the  right  material — to 
get  the  right  class  of  men  to  fill  these  vacancies,  or  to  enlarge  the 
Board. 

There  are  easily  accessible — very  close  at  hand — plenty  of  unsuitable 
men,  who  are  more  than  willing  to  attempt  to  fill  these  most 
responsible  and  ability-requiring  positions ;  but  those  fitted  and,  at  the 
same  time  available,  for  these  posts  are  scarce.  In  a  word,  business 
men,  whose  services  as  members  of  a  Board  of  Direction  of  a  bank 
would  be  of  the  most  value,  are  generally  least  willing  to  serve  there 
— the  most  difficult  to  be  induced  to  take  such  posts.  A  deal  of 
gratuitous  work,  unwelcome  and  wearing  responsibihty,  and  very  little 
of  what  business  men  deem  compensation,  are  the  things  which  block 
the  way  to  many  a  good  man's  acceptance  of  a  Directorsliip  in  the 
National  bank  of  the  period. 

Then,  when  a  new  Director  is  to  be  selected  and  elected,  it  is 
particularly  to  be  desired  that  he  shall  not  only  be  the  right  man  in 
point  of  general  qualifications,  but  that  he  shall  be  specially  conversant 
^vith  trade  and  credits  m  a  branch  of  business  w^hich  is  not  already 
well  enough  represented  on  the  Board.  So  that  the  hunt  for  the  right 
man,  with  the  desired  experience  and  antecedents  is  often  a  long  and 
difficult  one.  Particularly  is  this  the  case  in  our  large  towns  and 
cities,  where  many  active  competing  banks  have  been  absorbing  in 
the  building  of  their  Boards  all  the  best  material  to  be  found  in  the 
various  branches  of  trade  and  finance  in  their  vicinity.  In  such  a  case 
it  is  often  the  practice  to  tender  to  Directors  of  promise,  on  Boards 
of  small  banks  positions  in  the  same  capacity  in  the  larger  banks. 
There  is  nothing  in  this  custom,  if  manly  means  are  adhered  to,  that 
is  not  regular  and  commendable.  Promotions  are  always  in  order, 
as  well  among  bank  Directors  as  bank  Messengers. 

Vacancies  in  a  Board  of  Directors  may  be  filled  by  the  remaining 
Directors  without  waiting  for  a  meeting  of  stockholders.  In  that  case 
the  Board  talks  over  the  matter,  and,  after  deciding  that  it  will  be 
best  to  fill  a  vacancy,  appoints  a  committee  from  their  number  to 
select  a  candidate.  A  suitable  person  being  found,  who  is  willing  to 
accept  the  position,  liis  name  is  reported  to  the  Board,  and  there  he  is 
baUoted  for,  and,  generally,  unanimously  chosen. 

This  power  of  filhng  its  own  vacancies  gives  to  Boards  a  close  cor- 
poration aspect  which  is  open  to  some  objections,  but  objections  which 
cannot  easily  be  remedied. 

And,  in  fact,  in  smooth-going  times,  in  well  organized  banks,  the 
whole  matter  of  the  selection  of  Directors  is,  in  a  majority  of  cases, 
virtually  left  in  the  hands  of  the  Directors  themselves. 

There  is  no  written  law  that  they  shall  choose  their  own  successors, 
yet  such  is  the  custom  in  very  many  cases  with  the  very  best  banks. 

When  the  time  for  the  annual  meeting  comes  around,  the  Board 


273  PRACTICAL    BAXKING. 

looks  about  to  see  whether  or  not  there  are  to  be  aiiy  necessary  changes 
m  its  make-up.  And  it  then  selects  for  the  shareholders  a  ticket  with 
such  retirings  and  additions  upon  it  as  circumstances  have  dictated. 
This  ticket,  which  is  apt  to  be  a  ticket  in  the  best  interests  of  the 
shareholders,  is,  in  regular  course,  generally  unanimously  elected. 

And  the  course  I  have  described  is  not  to  be  hastily  condemned, 
since  a  good  Board  of  Directors  understands  well  the  director-needs  of 
the  bank. 

The  idea  of  extending  compensation — even  more  compensation  than 
a  niere  attendance  fee — is  one  worthy  of  more  consideration  than  it  has 
so  far  received  in  this  country.  The  worst  thing  about  such  a  plan  is 
the  fact  that,  under  its  workings,  incompetent  men  would  worm  them- 
selves into  paying  directorships  simply  for  the  purpose  of  securing 
the  fees — taking  positions  where  they  are  not  needed  for  the  pay 
which  they  need. 

This  abuse — this  corporation  blight — is  a  bad  feature  in  London 
banking. 

I  have  been  told  by  London  bankers  that  many  an  impecunious 
English  lord  would  not  be  able  to  spend  ' '  the  season  "  in  London 
were  it  not  that  he  had  succeeded  in  getting  positions  as  a  titled 
dummy  Director,  on  U)any  Boards  of  bank  and  insurance  direction. 
And  I  often  noticed,  while  in  London,  studying  financial  aspects  as 
revealed  in  London  newspaper  columns,  the  frequency  with  wliich  the 
names  of  noblemen  cropped  out  on  the  advertised  Usts  of  corporation 
Directors. 

But  here  is  a  London  "Times  "  advertisement  pointedly  illustrating 
this  London  Boards-of -Direction  humbug: 

ANTED,  AS  A  DIRECTOR  OF  A  JOINT-STOCK  BANK,  A  GENTLEMAN 
of  position.    Qualifications  nominal.    Fees  £500.    Apply  to 

SNOOKS  ct  SNOOKS,  etc.,  etc. 

BANK   PRESIDENTS. 

Under  the  present  banking  system  these  are  of  many  sorts ;  and  it 
was  just  about  the  same  under  the  old  State  banking  system — a  system 
with  which  I  had  a  close  acquaintance. 

A  hasty  classification  of  the  various  types  of  these  officials  can  be 
made  in  about  this  manner : 

The  first  was  made  President  because  he  was  a  wealthy  man, 
largely  interested  in  getting  up  the  bank,  and  because  he  wanted  the 
honor  of  the  position.  He  drew  no  salary,  did  no  real  work,  and  had 
little  fitness  for  bank  management.  He  managed  to  put  his  rather 
cramped  signature  in  the  proper  places,  and  his  fondness  for  his 
name  on  bills,  stock,  etc.,  made  him  willing  to  endure  the  writing 
drudgery.  His  Cashier  ran  the  bank  under  more  or  less  personal 
supervision  of  the  Avhole  Board. 

Another  was  chosen  l^resident  because  he  was  the  ablest  and  most 
prominent  man  on  the  Board.     He  had  business  enough  on  his  hands, 


W 


THE    PRKSIDEXT    AXD    DIRECTORS.  273 

outside  the  bank,  to  kill  two  common  men ;  yet  he  was  ambitious,  and 
ready  to  give  a  share  of  his  strength  to  his  bank.  He  drew  a  salary 
of  S6,000  from  the  bank,  and  necessarily  left  much  of  the  management 
with  the  Cashier.  As  for  the  Board,  why,  he  was  himself,  in  fact, 
pretty  umch  the  whole  Board,  for  his  colleagues  were  weaker  men, 
prone  to  let  him  have  his  own  way. 

A  third  was  made  President  because  he  had,  in  a  civil  service 
manner,  qualified  himself  for  the  position  by  a  life-long  study  and 
practice  of  banking.  He  had  been  through  every  position  in  a  bank, 
from  that  of  Messenger  upwards.  He  was  skillful,  affable,  strong. 
He  gave  his  whole  soul  to  the  management  of  his  large  bank,  com- 
manding—demanding— the  co-operation  of  his  able  Board  of  Directors, 
His  capable  Casliier  was  expected  to  be  the  executive  head  of  the 
institution,  and  under  him  all  the  officers  were  expected  to  toe  the  line 
of  duty.     He  was  paid  a  salary  of  $10,000  a  year,  and  fully  earned  it. 

Bank  shareholders  have  it  in  their  power  to  select  from  this  list  of 
types  the  type  of  a  President  they  will  have  to  take  care  of  their 
property. 

The  scope  of  a  President's  labors,  particularly  in  the  case  of  one  at 
the  head  of  a  bank  in  a  city  or  large  town,  has  changed  quite  materially 
within  the  last  thirty  years.  In  some  points  liis  work  and  responsibility 
is  less  than  formerly ;  in  others  more  arduous  and  pressing.  Business 
is  more  extensive  and  speculation  more  rampant  than  in  the  old  days ; 
and  hence,  in  many  respects,  the  average  bank  President  of  the  period 
carries  a  heavier  burden  than  did  his  predecessors  of  1840  and  there- 
abouts. As  far  as  keeping  up  the  loan  of  a  bank  in  a  large  financial 
centre  is  concerned,  there  are  aids  at  the  command  of  the  bank  Presi- 
dent of  the  present  day  which  the  old-time  bank  President  could  not 
avail  himself  of — could  not  because  they  either  did  not  exist  or  were 
of  such  small  importance  that  their  help,  if  summoned,  amounted  to 
but  very  little.  The  helps  which  I  have  particularly  in  mind  are 
dealers  and  brokers  in  negotiable  paper  and  the  mercantile  agencies. 

In  very  many  instances  in  city  bank  management  the  intelligent 
and  substantial  private  banking  houses,  which  make  a  specialty  of 
buying  and  selling  business  paper,  run  into  the  bank  loans  a  very 
large  percentage  of  the  paper  which  is  taken  on.  These  paper-dealing 
houses  make  it  a  business,  of  course,  to  study  up  and  keep  closely 
acquainted  with  the  means  and  standing  of  the  concerns  whose  paper 
they  negotiate,  since  their  reputation  and  profits,  in  the  long  run, 
depend  upon  their  own  success  and  rehabUity  in  the  matter  of  discrimi- 
nating regarding  the  credits  they  handle. 

The  private  banking  house  which  has  the  name  of  being  successful 
in  placing  uniformly  good  paper  with  the  banks  with  which  it 
deals — with  which  it  has  long  dealt — has  a  good  will  as  a  business 
concern  which  is  of  solid  money  value. 

The  value  of  our  well-established  mercantile  agencies  as  helps  to 


274  PRACTICAL    BANKIXG. 

bank  Managers  in  selecting  paper  for  their  loans,  I  have  elsewhere 
fully  discussed. 

I  can  easily  recall  the  time  when  we  had  no  such  agencies ;  I  can- 
not now  easily  make  out  how  we  managed  to  get  along  without 
them. 

While  Presidents'  duties  have,  in  some  points,  been  lightened  by 
methods  and  machinery  which  have  of  late  years  been  introduced  into 
the  banking  business  and  into  general  financing,  the  work  of  Cashiers 
has,  it  seems  to  me,  been  increased. 

In  all  that  relates  to  what  may  be  termed  the  internal  administra- 
tion of  a  bank — the  management  of  the  details  of  its  business  as 
transacted  by  the  oflB.cers  of  the  bank  in  its  various  departments — 
matters  were  never  more  complicated,  more  far-reaching  and  more 
extensive  than  they  are  at  present. 

There  are  to-day  scores  of  banking  methods,  such  as  those  of 
making  call  loans  upon  bonds,  shares,  etc.,  transferring  money  by 
telegraph,  loaning  between  banks,  buying  and  selling  domestic 
exchange,  etc.,  etc.,  which  have  sprung  mto  existence,  or,  at  least, 
increased  tremendously  within  the  period  I  have  alluded  to. 

BANK  PRESIDENTS'  ENDORSEMENTS. 
Our  banks,  in  the  conduct  of  their  routine  business,  are  in  the 
habit  of  alternating  the  endorsements  of  Presidents  and  Cashiers  as 
convenience  may  dictate.  When  the  Cashier  is  present  and  has  the 
time  he  is,  of  course,  accustomed  to  endorse  wherever  upon  checks, 
notes  and  drafts  the  endorsement  of  his  bank  is  demanded.  Wlien  he 
is  absent  from  the  bank,  or  for  other  reasons  is  not  so  placed  as  to  be 
ready  to  give  his  name  or  that  of  an  Assistant-Cashier,  the  President 
of  the  bank  endorses  as  President,  and  in  general  busmess  and  among 
banks  his  endorsement  is  received  as  the  equivalent  of  the  Cashier's. 
But  the  United  States  Treasury  Department  has  taken  the  ground  that 
a  bank  President  has  no  ex-officin  right  to  thus  endorse  for  his  bank — 
that  he  can  only  do  so  where  the  by-laws  of  the  bank  or  a  special 
resolution  of  the  Board  distinctly  provide  that  he  shall  dischai-ge 
such  a  duty.  This  is  a  rather  singular  position  for  the  Government 
to  take.  There  is,  as  Ave  have  stated,  a  general  idea  among  bankers 
that  a  bank  President  may,  in  the  absence  of  the  Cashier,  perform 
the  general  executive  duties  of  a  Caslaier.  But  the  Government  seems 
inclined  to  view  him  as  simply  the  head  of  the  Board  of  Directors, 
with  the  oflicial  duty  of  presiding  at  their  meetings,  serving  as  one  of 
their  number,  and  not  by  virtue  of  his  office  quaUfied  to  do  much  else. 


SOME    WORDS    ON    MANAGEMEXl.  275 


CHAPTER    XVIII. 

SOME    WORDS    ON    MANAGEMENT. 

In  the  management  of  the  details  of  a  bank— in  the  general  adminis- 
stration  of  its  internal  affairs — the  head  Manager  and  all  his  subordinates 
should  aim  to  be  as  helpful  and  accommodating  to  their  dealers  and 
general  customers  as  the  rules  of  good  banking  and  the  customs  and 
laws  of  business  will  allow. 

Every  bank  officer  should  fully  understand  the  bearings  of  all  the 
banking  questions  that  come  before  him  for  adjudication — should 
know  the  character  of  the  rights  and  responsibihties  involved  in  all 
the  points  at  issue  in  the  problems  which  may  present  themselves  for 
his  consideration.  When  he  has  found  out  just  where  he  stands,  he 
should,  in  all  cases,  endeavor  to  cut  red  tape  as  often  as  he  can — to 
settle  and  dispose  of  business  with  as  few  blocks  and  delays  on  account 
of  formalities  and  rules  as  possible. 

The  Teller  came  to  the  Cashier  with  a  check  which  some  bank 
would  not  pay  because  it  held  that  a  guarantee  of  a  certain  endorse- 
ment was  needed.  The  Teller  was  confident  that  the  check  was  all 
right  without  this  demanded  guarantee — thought  the  bank  upon  which 
it  was  drawn  was  wrong  in  asking  for  it,  and  was  in  favor  of  handing 
the  check  at  once  to  the  Notary  for  protest.  The  Cashier,  on  looking 
into  this  guarantee  point  carefully,  saw  that  the  check  really  did  not 
need  any  guarantee.  He  also  saw  clearly  that  there  would  not  be  the 
slightest  risk  or  impropriety,  for  the  sake  of  collecting  a  check  for  a 
valued  correspondent  and  facilitating  business,  in  conceding  a  pomt  to 
the  rather  contentious  neighbor-bank  which  demanded  this  guarantee; 
so  he  promptly  guaranteed  the  endorsement,  the  check  was  at  once 
collected,  and  nothing  more  ever  heard  from  it.  This  was  helping 
business  along  in  a  manly  and  sensible  way. 

The  Teller  brought  the  Cashier  a  check  which  he  said  he  could  not 
collect  from  a  neighbor-bank  because  they  claimed  its  payment  had  been 
stopped  by  the  drawer.  The  check  had  the  appearance  of  being  right 
m  all  points— properly  endorsed  and  all  that.  The  Teller  suggested 
that  it  be  protested.  The  Cashier  divined  that  there  must  be  some 
error  or  misunderstanding  about  the  situation  of  the  cheek  when  the 
parties  to  it  ordered  it  stopped.  Instead  of  returning  it  dishonored,  he 
had  liis  messenger  hunt  up  the  drawer,  who  was  a  well-known  business 
man  not  far  away.  The  drawer  was  found,  and  he  readily  and  grate- 
fully cashed  the  cheek  himself.     He  had  hastily  stopped  it,  thinking  it 


276  PRACTICAL  BACKING. 

failed  to  reach  the  right  hands,  when  it  really  had  only  been  slightly 
delayed  in  the  mails. 

These  are  only  a  couple  of  simple  illustrations  of  common  sense  and 
accommodating  practices  in  every-day  banking — practices  which  should 
be  the  rule  in  all  banks. 

THE   MOODS    OP   BUSINESS    MEN. 

A  gentleman,  seeking  an  executive  position  of  responsibihty  through 
an  advertisement  in  a  leading  metropolitan  paper,  states  that  among 
the  qualifications  which  he  possesses  is  a  thorough  acquaintance  and 
experience  with  the  moods  of  business  men.  He  has  certainly  intro- 
duced a  very  suggestive  expression  into  his  card.  Treating,  as  we  do, 
of  only  the  banking  side  of  business,  we  use  the  text  which  the 
advertiser  has  furnished  us  in  its  application  to  bank  Managers  and 
bank  management.  Pew  there  are  that  have  had  much  experience 
with  banks,  either  as  sellers  of  paper  or  bori-owers  of  money,  who 
have  not  discovered  that  the  success  of  their  negotiations  is  quite 
often  apt  to  depend  as  much  upon  the  moods  of  the  men  who  ai*e  at 
the  helm  of  the  banks,  as  upon  the  actual  monetary  situation  of  the 
institution  approached  or  the  real  claims  of  the  applicant. 

Tliis  certainly  is  not  as  it  should  be.  The  ideal  bank  Manager  is  one 
who  treats  all  who  approach  him  \\ith  unvarying  courtesy,  and  who 
never  gives  way  to  moods  or  is  influenced  by  his  own  personal  f eehngs. 
He  moves  squarely  forward  upon  an  abstract  business  line.  He  may 
feel  reluctance  in  making  a  move  of  any  sort,  for  some  unaccountable 
reason,  or  he  may  have  an  unreasonable  aversion  to  the  medium 
through  which  applications  reach  hun ;  yet,  if  he  is  a  well-disciplined 
man  of  business  who  lias  learned,  as  every  truly  successful  financier 
has  learned,  that  his  moods  are  not  to  be  trusted,  he  looks  cheerfully 
into  all  reasonable  proposals  for  loans  and  discounts,  and  makes 
advances  with  the  proper  discretion,  when  his  institution  is  in  a 
situation  to  let  out  funds. 

There  come  to  all  men  hours  of  depression,  times  whep  trifles 
annoy,  irritation  seems  almost  a  second  nature  and  the  drudgery  of 
business  somethmg  almost  unendurable.  Sometimes  there  are  evident 
reasons  for  these  moods.  Illness,  loss  of  sleep,  anxiety  over  others 
who  are  in  sufliering,  often  causes  the  feelings  described.  But, 
whether  the  outcome  of  something  that  can  be  seen,  or  the  result 
of  influences  so  occult  as  to  be  undiscoverable,  they  must  alike  be 
kept  down  and  suppressed,  for  there  is  no  place  for  them  in  the  lines 
of  business.  The  borrowing  and  lending  world  must  move  on  and 
keep  these  uaoods  and  feelings  out  of  sight. 

DEALINGS    WITH    STRANGERS. 
There  should  be  little  need  of  emphasizing  for  alert  and  intelligent 
bankers  the  dangers  and  responsibilities  arising  from  having  bank 
transactions  of  any  sort  with  strangers — with  parties  not  known  to  be 


SOME   WORDS    OX    MANAGEMENT.  277 

honest  and  responsible.  But  I  have  recently  had  my  attention  kindly 
called  to  an  incident  in  real  life  in  bankinj?,  in  a  distant  State,  which 
applies  so  directly  to  the  subject  in  hand,  that  I  cannot  well  pass  it  by. 

The  bank  Cashier,  who  was  a  most  able  manager,  was  sometimes 
in  the  habit  of  taking  on  new  individual  accounts  in  a  rather  indis- 
criminate manner — not  holding  it  to  be  absolutely  necessary  to  examine 
very  carefully  into  the  antecedents  of  any  party  who  simply  wished  to 
deposit  and  draw  and  never  to  borrow. 

When  it  was  hinted  to  him  that  such  a  method  in  banking  had  its 
peculiar  dangers,  since  it  threw  an  unwonted  responsibility  upon 
Tellers,  Book-keepers,  etc.,  who  might  over-pay  and  give  money 
credits,  or  in  some  other  way  get  entangled  with  depositors  who 
might  not  be  able  to  respond,  the  prompt  reply  was  pleasantly  made, 
that  bank  officers  should  not  make  mistakes. 

Now  I  think  I  shall  be  clearly  understood  when  I  say,  that  any 
theory  or  practice  of  banking  which  does  not  recognize  mistakes  as  a 
part  of  the  methods  and  macliinery  of  practical  banking  is  resting  upon 
uncertain  grounds.  The  best  of  bank  officers  must  make  errors ;  and, 
in  the  administration  of  any  bank,  this  fact  must  be  discounted. 

But  to  the  case  in  point  with  the  bank  which  did  not  intend  to 
recognize  this  liability  as  an  element  in  banking. 

Brown  &  Robinson  kept  an  excellent  account  with  this  bank,  and 
Brown  &  Jones  also  kept  an  account  which,  however,  was  not  up  to 
that  standard,  and  they  were  also  strangers  lately  incautiously 
taken  on. 

When  these  latter  parties  collapsed,  the  bank  took  little  interest  in 
their  failure  until  it  was  found  that  their  check-drawings  upon  the  bank 
were  upon  funds  that  were  not  theirs— money  that  had  been,  by  the 
mistake  of  a  Book-keeper,  credited  to  Brown  &  Jones,  when  it  really 
belonged  to  Brown  &  Robinson. 

There  is  nothing  novel  in  such  a  complication  as  this.  I  only  men- 
tion it  because  it  is  an  illustration  in  clear  type  of  a  common  class  of 
bank  misadventures — a  class  which  would  be  much  larger  than  it  is,  if 
most  experienced  bank  Managers  were  not  extremely  careful  about 
extending  depositing  facilities  to  unindorsed  parties. 

Even  in  the  best  managed  banks,  losses  from  misplaced  credits  must 
sometimes  occur. 

I  have  in  mind  a  case  where  a  rotten  and  failing  country  bank  ran 
along  for  months  with  its  reserve  agent  in  a  large  Clearing-House  city, 
upon  heavy,  misplaced  credits  of  remittances — remittances  which  came 
from  a  strong  bank  bearing  neai'ly  the  same  name,  with  a  final  loss 
thereby  to  the  city  bank  of  many  thousand  dollars. 

A    DOCTOR  FOR  A   BANK. 
The  Bank  of  England  has  a  regular  medical  attendant  who  is  one 
of  the  standing  officials  of  that  institution.     His  duty  is  what  his  title 
indicates.     He  daily  goes  his  rounds  among  the  officers  of  the  bank  for 


278  PRACTICAL  BA^'KI^'G. 

the  purpose  of  looking  after  their  health.  If  an  officer  wishes  a  vaca- 
tion on  account  of  illness  the  bank  doctor  considers  it  his  duty  to  make 
a  confirmatory  examination.  He  also  considers  it  his  duty  to  keep  a 
constant  watch  over  the  condition  and  surroundings  of  the  men  in  liis 
charge  so  as  to  see  that  in  sanitary  matters  everything  is  as  it  should 
be.  It  would  be  an  excellent  plan  if  some  of  our  banks  and  other  large 
employers  of  help  would  adopt  this  medical  notion. 

DEPARTMENT    ACCOUNTABILITY. 

In  the  administration  of  a  bank  it  is  extremely  desirable  that  there 
shall  be,  between  the  various  departments  and  the  central  manage- 
ment, as  far  as  the  daily  details  of  business  are  concerned,  what  may 
be  termed  a  responsive  accountabihty,  so  that  at  the  close  of  a  day's 
w^ork,  the  Manager  may  know  just  where  all  the  cash,  checks  and 
notes  which  have  been  turned  over  to  his  institution  by  his  correspon- 
dents and  home  depositors  have  lodged — just  how  the  various  items 
have  been  scattered  among  his  several  departments  of  work.  The  more 
perfect  the  system,  by  which  just  accountability  is  established,  the  more 
safety  in  the  general  conduct  of  the  business  of  the  bank  and  the 
greater  the  readiness  with  which  errors  may  be  discovered  at  the  close 
of  the  day  when  the  cash  is  to  be  settled,  and  the  final  discharge  of  all 
the  letters  by  checking  and  acknowledgment  is  to  be  brought  to  a 
conclusion.  With  these  aims  in  view  there  is  no  better  system,  as  far 
as  the  conduct  of  transactions  with  regular  home  depositors  is 
concerned,  than  that  which  rigidly  requires  that  all  deposits  of  cash 
items  and  collections  shall  be  accompanied  by  careful  invoices  and 
tickets — bills  of  particulars. 

The  letters  with  remittances  of  the  usual  variety  that  are  daily 
coming  into  a  bank  should  be  opened  by  the  Cashier  or  his  special 
assistants,  and  then  passed  through  the  hands  of  the  Tellers  and 
Collection  Clerks  for  the  purpose  of  permitting  them  to  take  from  the 
same  the  items  belonging  to  them,  and  receipt  by  check  or  initials  for 
the  items  taken.  On  the  return  of  the  letters  to  the  Cashier  he  can 
see  at  a  glance  whether  or  not  each  letter  has  been  fully  discharged — 
all  its  contents  duly  receipted  for — before  he  finishes  its  work  by  a  final 
acknowledgment. 

EVERYTHING    EXAMINED. 

One  of  the  best  rules  ever  established  in  a  bank  is  that  requiring 
that  all  clerical  work  done  therein  shall  be  examhied — shall  pass  under 
the  inspection  of  two  pairs  of  eyes.  This  rule  obtains  in  many  of  our 
largest  and  most  systematically  managed  banks,  is  increasing  in  its 
adoption,  and  I  see  no  reason  why  it  shovild  not  be  generally  in  vogue. 

In  all  bank  work,  no  matter  how  faithful  and  skilful  the  workers, 
mistakes  will  be  made.  Every  bank  manager  ought  to  remember  that 
it  is  just  impossible  for  the  institution  under  him  to  be  run  along 
without  such.  Every  bank  clerk  should  recognize  the  fact  that  to 
make  more  or  less  errors  in  his  writings,  his  eipherings,  his  countings, 


SOME   WORDS    ON    MANAGEMENT.  279 

and  his  figurings,  is  to  be,  if  we  may  so  express  it,  a  feature  of  his 
business— his  general  way  of  banking  life.  He  cannot  pretend  to  the 
po-ssession  of  supernatural  powers,  but  has  a  human  liability  to  error. 
He  should,  therefore,  do  the  very  best  he  can  and  then  study  to 
acquire  a  habit — a  temperament  that  is  adapted  to  his  work  and  its 
large  responsibilities. 

In  the  case  of  bank  officers,  as  in  the  cases  of  many  other  wearing 
positions  in  life,  it  is  the  woiTy  and  anxiety,  the  fear  and  the  fret  that 
kills,  and  not  the  real  "work. 

And  a  deal  of  all  this  mental  distress  and  strain  may  be  avoided  by 
the  establishment  in  the  bank  of  a  proper  system  of  "  doing  tilings," 
and  by  the  presence  there  of  a  wise,  able  and  kind-hearted  chief 
executive  officer,  who  fully  recognizes  the  truth  of  what  I  have  said 
regarding  the  liability  of  every  one  in  his  bank,  himself  included,  to 
make  errors,  and  who  knows  enough  and  is  enough  of  a  Christian  not 
to  make  himself  a  terror  in  the  eyes  of  his  subordinates. 

Some  of  the  worst  bank  defalcations  I  have  known  have  been 
directly  traceable  to  the  fear  of  mistake-making  subordinates,  who 
have  begun  their  irregularities  by  endeavoring  to  hide  from  Presidents 
and  Cashiers  innocent  errors. 

There  is  one  other  point  that  should  be  mentioned  in  this  connec- 
tion, and  it  is  this:  In  making  these  inevitable  errors  of  which  I  have 
spoken,  bank  officers  should  always  be  prompt  to  acknowledge  their 
own  responsibility  in  the  matter,  should  never,  either  by  word  or 
inference,  endeavor  to  tlirust  undesei'ved  blame  upon  others,  or  spend 
much  time  and  talk  in  fi'aming  excuses  for  their  slips.  Accept  the 
situation,  and  go  ahead  and  do  the  best  that  can  be  done  in  the  future. 

Referring  to  the  idea  with  which  this  paragraph  opened,  I  remark 
that  the  only  system  of  bank  work  which  wiU  reduce  the  average  of 
en'ors  to  the  minimum  is  that  which  demands  that  every  possible 
opportunity  be  taken  to  pass  work  tlirough  the  hands  of  two  officers. 

FOREVER   FORGETTING. 

Cashiers,  Transfer  Clerks.  Tellers,  and  others,  in  bank  w^ork,  who 
are  liable  to  be  called  upon  to  decide  difficult  points  that  are  coming 
up  from  time  to  time  relative  to  the  rights  and  duties  of  parties  to 
transfers,  to  notes,  checks  and  drafts,  are  perfectly  well  aware  of  this 
difficulty  in  their  business.  In  the  first  place,  new  points,  of  the 
character  in  question,  are  daily  coming  up.  If  the  bank  officers  are 
alert,  faithful  and  intelligent,  they  at  once  study  into  these  new  points 
— post  themselves  thorouglily  regarding  all  their  bearings — so  as  to  be 
able  to  take  intelhgent  action  in  disposing  of  them.  It  is  quite  likely 
to  be  the  case,  in  many  instances,  that  a  very  long  time  may  elapse 
before  they  are  again  called  upon  to  pass  upon  a  case  the  situation 
and  bearings  of  which  are  precisely  identical  with  the  one  they  have 
studied  up  and  disposed  of. 

Every  bank  officer,  for  a  long  time  in  any  particularly  responsible 


280  PRACTICAL    BAXKIXG. 

position,  will  fully  apprehend,  as  he  reads  this  paragraph,  that  we  are 
quite  correct  in  saying  that  one  of  the  features  of  his  business  that 
gives  hiui  no  little  care  is  the  fact  that,  from  want  of  consecutive — 
frequent — practice  in  the  administration  of  these  various  affairs  of 
wliich  we  have  spoken,  he  is  forever  forgetting  and  forever  being 
obliged  to  return  afresh  to  the  study  of  old  points  in  the  methods  of 
banking. 

00  up  and  down  any  street  of  banks  to-day  and  enquire  of  the  most 
thorough  bankers  there  to  be  found  how  you  shall  proceed — how  act — 
in  some  difficult  point  of  bank  administration,  in  these  matters  of 
details  of  which  I  am  speaking,  and  the  discovery  will  be  made  that 
it  is  not  easy  to  get  prompt  and  clear  information  in  the  premises. 
You  have  forgotten,  and  they  have  foi'gotten,  all  about  the  status  of 
the  matter  in  question,  because,  may  be,  it  is  so  long  since  the  point 
has  been  up. 

It  is  for  these  reasons,  as  well  as  others,  that  every  bank  should  be 
"well  equipped  in  the  matter  of  library  and  should  have  a  superior  class 
of  banking  reference  books. 

1  have  tried  in  these  pages  to  put  on  record  many  points  of  informa- 
tion which  bankers  have  forever  been  learning  and  forever  forgetting. 

PROPER  DIVISION   OF   LABOR. 

When  practicable,  where  the  bank  is  large  and  its  business  exten- 
sive, it  is  well  to  have  separate  officers  for  every  department  of  work. 
Safety  lies  in  this  method  of  administration.  The  different  depart- 
ments, when  managed  entirely  distinctly,  and  with  proper  system,  act 
as  checks  upon  and  guards  of  each  other.  The  situation  under  such 
methods  is  such  that  irregularities  and  defalcations  become  almost 
impossible  except  when  two  or  more  dishonest  officers  work  in  collusion. 
But  if  various  kinds  of  bank  work  are  to  be  combined  under  one 
department  great  care  should  be  taken  in  making  up  the  mixture. 
Some  combinations  are  comparatively  safe  while  others  are  exceedingly 
dangerous. 

If  a  bank  finds  itself  able  to  get  along  with  one  Teller — an  officer 
Avho  shall  do  all  the  paying  out  and  receiving — sucli  an  arrange- 
ment can  be  made  without  incurring  any  of  the  risk  which  might 
exist  if  the  combination  was  of  a  different  type.  But  it  is  always 
objectionable,  on  the  grounds  explained,  to  put  the  work  of  a  Book- 
keeper and  Teller  in  the  hands  of  one  officer.  It  is  desirable  for  the 
same  reasons  that  the  discount  and  collection  departments,  w-hich  can 
if  economy  demand  be  combined  together,  should  be  kept  distinct  from 
and  independent  of  the  receiving  and  paying-out  departments. 

In  the  largest  banks,  where  there  are  systematic  divisions  of  labor 
under  many  heads,  there  will  be  changes  and  substitutions  growmg  out 
of  the  illness  and  vacations  of  its  officers.  In  making  the  shifts 
and  transfers  which  become  imperative  under  such  circumstances 
Managers  should  carefully  bear  in  mmd  the  necessity  of  avoiding,  even 


SOME    WORDS    OX    MANAGEMEPfT.  281 

for  short  periods,  unsafe  combinations.  Officers  wlio  are  transferred 
from  one  department  to  another  under  i^ressure  of  necessity  should  be 
careful  to  see  that  the  work  they  enter  upon  is  well  arranged  and  in  an 
honest  condition  when  it  is  turned  over  to  them.  A  Teller  should  not 
expect  any  officer  to  take  charge  of  his  ca.sh  until  there  has  been  a 
mutual  examination  and  proper  certainty  that  the  cash  is  all  right  at 
the  time  of  the  new  departure. 

THE   BANKING   CONVENIENCES    OP    TO-DAY. 

The  banking  interests  of  the  country  were  never  in  more  competent 
and  more  honest  hands  than  at  the  present  time.  And  the  present 
National  banking  system  is  indisputably  the  best  that  ever  existed  in 
this  or  any  other  country.  It  is,  beyond  comparison,  the  superior  of 
the  old  State  banking  system  of  New  England  and  other  localities, 
wliich  in  former  days  commanded  no  small  share  of  public  admiration. 

And  in  another  direction  the  most  astonishing  advance  has  been 
made.  And  that  is  in  the  application  of  the  various  improvements 
and  discoveries  of  modern  times  to  what  we  perhaps  rightly  term  the 
mechanism  of  banking.  What  marvellous  changes  have  been  made 
since  I  first  entered  a  bank  in  our  machinery  and  in  our  methods  of 
running  the  same ! 

To-day,  as  I  close  my  bank  at  two  o'clock,  I  find  I  have  hundreds 
of  thousands  of  dollars  in  New  York  that  should  be  in  Boston.  I  hand 
my  porter  a  short  telegram,  and,  when  I  reach  my  desk  to-morrow 
morning,  1  find  thereon  the  hundreds  of  thousands  ixi  gold,  greenbacks 
or  checks,  that  have  come  humming  home  to  me  during  the  silent 
watches  of  the  night,  by  express  or  mail,  which  have  thus  completed 
the  work  of  the  telegraph. 

I  receive  a  cipher  telegram  from  the  Pacific  coast,  and  I  pay  to  the 
San  Francisco  merchant,  at  my  counter  in  Boston,  a  balance  which  he 
has  on  deposit  in  the  Great  Western  Bank,  in  San  Francisco,  and  he 
goes  on  his  way  rejoicing. 

Under  the  deep  waves  of  the  Atlantic  stretches  a  wire  that  brings 
me  at  any  moment  the  last  quotations  for  United  States  bonds,  Consols 
and  money  in  London,  and  executes  money  transfers  for  me  as  easily 
as  I  cash  a  Boston  check. 

I  Avish  for  the  very  latest  New  York  quotations  of  the  stock  market, 
and  the  ticker  at  my  hand  reels  them  oflf  for  me  with  automatic  precision. 

I  am  asked  to  make  a  negotiation  with  the  Stock  Board,  or  with 
banks  or  bankers  of  my  own  city,  and  through  the  telephone  goes  all 
that  is  needed  to  complete  the  trade. 

I  am  honored,  Mr.  Publisher,  by  a  call  from  you  at  our  bank ;  and,  at 
a  touch  of  a  signal  electric  wire,  running  under  the  floor  from  the  side 
of  juy  desk  to  tlie  bronze  door  of  my  private  office,  the  door  flies  open, 
and  you  enter;  and,  when  you  leave  me,  you  are  "fired  out"  by  the 
same  sort  of  lightning. 

I  grow  weary  of  w^riting,  or  am  impatient  over  its  slowness,  and  the 


282  PRACTICAL    BANKING. 

stenographer  comes  to  my  relief,  with  his  complement  the  type-writer, 
and  the  hektograph  man  and  the  lithograph  man  are  not  far  away, 
each  ready  to  multiply  with  wonderful  ease  any  written  words. 

Vaults  of  the  finest  steel,  and  of  the  most  substantial  character, 
with  huge  doors  that  seem  to  swing  on  golden  hinges,  close  upon  our 
treasures,  as  if  by  magic,  with  combinations  that  are  keyless,  guarded 
by  burglar  alarms  that  are  electric. 

So  I  might  go  on  with  the  list  of  improvements  that  have  been  made 
in  the  field  we  are  surveying. 

The  last  half  of  the  nineteenth  century  has  witnessed,  in  our  line, 
progress  very  similar  to  that  noted  in  almost  every  other  quarter. 

Let  us,  who  are  still  in  the  harness  of  business,  and  those  who  are 
so  soon  to  be  our  successors,  see  to  it  that  all  this  fine  business 
machinery,  which  I  have  attempted  to  describe,  is  well  manned,  and 
all  these  complicated  methods  of  business,  which  I  have  endeavored  to 
explain,  well-managed  and,  if  possible,  improved.  And  let  every 
endeavor  be  made  to  keep  high  the  general  tone  of  business  of  the 
times  in  which  we  live  and  work. 

ECONOMIZING  TIME. 
Mr.  Gilbart  writes  so  well  on  this  point  that  I  must  quote  from  him : 
' '  A  banker  should  know  how  to  economize  his  own  time.  One  mode 
of  doing  this  will  be,  as  we  have  intimated,  to  assign  inferior  duties  to 
others.  His  accountant  should  keep  his  books  and  make  his  calcula- 
tions. His  secretary  should  write  his  letters  (except  those  of  a  private 
or  confidential  nature),  and  he  should  only  sign  them.  His  chief  clerk 
should  attend  to  the  discipline  of  the  office. 

A  banker  at  the  head  of  a  large  establishment  should  not  only  be 
acquainted  with  the  art  of  banking,  but  he  should  also  be  acquainted 
with  the  art  of  government.  He  ought  to  put  a  clever  man  at  the  head 
of  each  department,  and  reserve  to  himself  only  the  duty  of  general 
superintendence.  He  should  give  these  parties  a  pretty  wide  discre- 
tion, and  not  encourage  them  to  ask  his  instructions  about  matters  of 
comparatively  trifling  importance.  If  he  does  this  they  will  never 
learn  to  think  for  themselves — never  feel  that  wholesome  anxiety 
which  results  from  a  sense  of  responsibility  and  never  acquire  that 
decision  of  mind  which  arises  from  the  necessity  of  forming  an  inde- 
pendent judgment.  Consequently  they  will  be  less  useful  to  him  in 
their  present  position,  and  never  become  qualified  for  higher  oflices." 

INCIDENTAL  EXPENSES. 
The  incidental  expenses  of  banking  sometimes  run  away  with  the 
profits  of  the  business.  This  became  a  very  apparent  fact  during  an 
era  not  long  past  when  it  was  the  general  fashion  to  build  extrava- 
gant banking  buildings  and  to  fit  up  banking  rooms,  which  should 
always  be  plain  and  solid  in  their  leading  features,  in  the  most  showy 
and   ornate   style.     There   is  ever  a  tendency  among  employees,  of 


SOME    WORDS   ON    MANA.GEMENT.  283 

corporations  at  least,  towards  carelessness,  if  not  extravagance,  in 
incidental  expenditure.  In  bank  management  there  is  special  need  of 
watchfulness  against  this  drift.  There  is  something  rich  in  the  sound 
of  the  word  "  bank  "  to  the  ears  of  the  traders  who  eater  to  the  various 
incidental  wants  of  the  bank,  and  it  has  become  a  matter  of  common 
opinion  among  bank  Managers  that  they  are  in  danger  of  being  charged 
a  little  higher  in  some  instances  simply  because  they  are  a  bank — an 
institution  which  some  seem  to  consider  as  made  of  money. 

Purchases  of  bank  supplies  are  often  made  by  subordinate  officers, 
because  they  know  Just  what  they  need,  when  the  things  bought  are 
for  use  in  their  own  departments. 

It  should  be  a  rule  with  bank  officers  never  to  buy  for  the  bank  any 
article  which  it  does  not  really  need,  nor  more  of  any  given  article  than 
is  really  necessary.  And  in  purchasing  they  should  use  the  same  degree 
of  care  in  the  matter  of  price  that  they  would  if  they  were  making  the 
purchases  for  theu*  own  home  establisliment. 

Though  buying  of  the  sort  I  have  described  may  sometimes  fall  into 
the  hands  of  the  clerks,  no  bill  should  be  paid  and  no  expense  charge 
entered  upon  the  books  of  the  bank  until  the  same  has  been  approved 
by  the  President  or  Casliier  of  the  bank.  This  formal  approval  can 
be  made  upon  the  bills  when  bills  are  taken ;  but  when  purchases  are 
made,  or  expenses  of  any  sort  incurred  which  are  not  represented  by  a 
bill,  an  entry  should  be  made  upon  a  charge  ticket,  and  the  Book- 
keepers instructed  not  to  enter  any  charge  ticket  which  does  not  bear 
upon  its  face  the  formal  approval  of  the  President  or  Cashier.  The 
charge  ticket  should  be  a  regular  printed  form  and  always  on  hand, — 
it  may  be  as  simple  as  this  (see  Form  72) : 


TENTH   Ii^ATIOlSrAL  BAE"K,   of  Chicago. 

Mn.j     5 18C|0. 

C  H  A  R  G  E cpjfJiJLjo^ji.  (A.x.xLjQLA>k>jjt 

C»*'Jl-a.oJL     (S>j^JLsLM.ut>^J>-A.     jLxXJkJL     CA^.      V     lis.      JL-KJ^     JlJJLjJi 

xx_a.CXji_JOvj6jt     ^juw-jiJtiv     V     "^J-jOuixju^, 

$250 

Approved,             E.  J,  K.,  Casliier. 

ADVANCED    IDEAS    AND   METHODS. 

In  the  arrangement  of  the  methods  and  machinery  of  banking,  our 
bank  officers  should  steadily  endeavor  to  keep  up  with  the  times. 
"Keeping  up  with  the  times "  is  a  rather  abstract  expression.  Perhaps 
I  might  say,  with  more  propriety,  that  banks  should  ever  be  on  the 


284  PRACTICAL    BANKING. 

alert  and  ready  to  adapt  themselves  to  the  changes  that  are  constantly 
going  on  in  the  outside  business  world.  Trade,  commerce,  speculation 
and  manufacturing  are  steadily  increasing  almost  everywhere ;  and  the 
methods  of  conducting  these  various  branches  of  business  are  every 
day  changing.     Banks  must  keep  step  with  the  procession. 

In  an  active  bank,  hardly  a  day  passes  without  developing  some 
new  phase  of  business ;  and  new  phases  of  business  demand  new  phases 
of  banking ;  and  that  is  the  most  successful  and  the  most  useful  bank 
which  most  rapidly  adapts  itself  to  the  times — places  itself  in  the  best 
condition  for  meeting  the  reasonable  demands  of  the  business  com- 
munity. 

It  is  not  easy  for  a  bank  to  stand  still  in  these  days ;  it  must  either 
go  ahead  or  fall  behind. 

The  situation  of  the  Bank  of  England  is  to-day  quite  an  interesting 
illustration  of  tliis  point.  In  visiting  that  old  bank,  I  could  not  fail  of 
noticing  the  presence  there  of  an  air  of  extreme  conservatism  in 
methods  of  doing  business.  Every  thing  in  and  about  the  bank,  in 
arrangement  and  methods,  seemed  to  me  extremely  old-fashioned. 
But  the  immense  increase  of  the  bank's  business  is  now  demanding  of 
it  an  unusually  large  amount  of  clerical  work.  The  venerable  institu- 
is  making  spasmodic  exertions  to  adapt  itself  to  the  demands  made 
upon  it.  It  seems  to  desire  to  move  with  the  times.  It  has  recently 
undertaken  the  inscription  of  a  large  number  of  new  colonial  loans 
and  the  banking  conduct  of  many  new  issues.  But  the  old  bank  is  so 
antiquated  in  its  methods  and  machinery,  has  been  so  long  in  the  ruts 
and  has  so  many  slow  old  clerks,  that  Londoners  complain  that  it  can 
not  cope  with  the  details  of  the  work  that  has  come  upon  it,  and  are 
growling  over  its  slowness  in  making  ti'ansfers,  conversions,  etc.  The 
venerable  clerks  of  the  Bank  of  England  are  really  in  danger  of  being 
driven  out  of  tlieir  respectable  senses  by  the  great  press  of  new  work 
the  times  are  bringing  upon  them. 

OVERWORKING   BANK   OFFICERS. 

This  is  but  another  term  for  defective  management.  There  can  be 
few  worse  errors  in  the  administration  of  the  internal  details  of  the 
bank  than  that  of  so  arranging  the  help  and  duties  of  the  various 
departments  as  to  throw  upon  faithful,  skillful  and  patient  clerks  too 
severe  labors,  too  long  hours,  or  too  much  responsibility  and  strain  of 
iiiind  and  body. 

There  have  been  many  instances  in  banking,  particularly  in  the  large 
cities,  w  here  banks  have  for  long  periods,  and  thi'ough  eras  of  great 
business  pressure,  been  run  with  staffs  of  officers  of  altogether  insufficient 
strength  for  the  duties  falling  upon  them.  This  method  of  nianage- 
nieiit  is  always  sure  to  prove  in  the  end  the  poorest  sort  of  economy. 

Cxood  officers,  ambitious  of  doing  their  very  best,  are,  under  such  an 
administration,  prematurely  broken  down.  Others,  who  are  less  faith- 
ful, lose  all  courage  and  ambition  under  the  undue  pressure  and 


SOME    WORDS    ON    MANAGEMENT.  285 

confusion  of  the  situation,  and  fall  into  shiftless  and  inefficient  ways 
of  work.  Vacations,  which  should  always  be  provided  for  in  every 
bank,  are  broken  in  upon  or  entirely  abandoned  in  these  short-handed 
banks,  and  the  general  way  of  work  there  becomes  a  weary  tread-mill 
sort  of  life.  The  bank  in  the  end  is  as  much  a  sufferer  from  this  mal- 
administration as  the  employees,  for  frequent  break-downs  of  good 
clerks  occur,  ■with  the  result  of  bringing  in  untried  and  inexperienced 
workers.  Even  aside  from  illness,  changes  in  the  working  corps  of  such 
a  bank  as  we  are  describing,  are  apt  to  be  frequent ;  for  every  man 
there,  of  ability  and  ambition,  is  steadily  watching  for  a  chance  to  get 
out  of  his  bad  place,  and  embraces  the  first  hopeful  opportunity  to 
make  a  change. 

A  bank  situation,  such  as  I  have  here  described,  comes  under  the 
observation  of  many  an  experienced  banker— it  is  no  fancy  sketch. 

The  responsibility  for  this  most  uneconomical  sort  of  administra- 
tion of  affairs  almost  always  rests  with  the  Chief  Executive  of  the 
institution,  who,  in  such  cases,  is  quite  sure  to  be  a  man  wlio  has  not 
proper  ideas  of  bank  management,  as  far  as  details  are  concerned — 
who  is  really  destitute  of  the  executive  ability  necessary  in  his  position. 

Somtimes  the  evil  ways  we  have  spoken  of  gi'ow  out  of  a  want  of 
proper  feeling  and  consideration  for  subordinate  officers  on  the  part  of 
Presidents  or  Cashiers.  It  is  but  rarely  that  the  Directors  are  to  blame 
in  the  matter. 

A  good  motto  for  any  bank  is  this :     (^f^ive  no  officer  too  much  work 

or  too  little  pay. 

BANK    OFFICERS'    SALARIES. 

I  might  carry  out  the  very  good  principle  of  giving  in  the  fewest 
words  the  greatest  possible  amount  of  information,  by  the  simple  state- 
ment that  bank  Cashiers  and  bank  clerks  should  be  paid  for  their 
services — not  under-paid,  not  overpaid,  but  simply  paid. 

I  am  not  prepared  to  say  that  the  bank  clerks  of  the  period  are 
underpaid,  neitlier  am  I  inclined  to  say  that  they  are  often  overpaid. 

It  is  possible  that  a  few  hints  of  value  may  be  thrown  out  by 
considering  for  a  moment  the  character  of  the  services  rendered  by  the 
laborers  in  question.  A  sensje  of  justice  prevails  in  the  average 
business  employer  in  circles  of  trade  and  eonunerce,  general  financing 
and  banking,  and  failure  to  recognize  and  compensate  help  in  these 
various  departments  of  work  comes  more  from  a  want  of  real  knowl- 
edge of  the  value  of  services  rendered  than  from  any  other  single 
source. 

In  the  matter  of  services  rendered  by  workers  in  banks,  here  are 
some  points  that  deserve  attention — points  which  I  present  with  little 
regard  to  the  order  of  their  setting  forth  : 

A  bank  officer,  competent  to  take  an  independent  position  in  a  bank 
— to  manage  a  leading  department — must  be  a  man  of  good  intellectual 
abilities,  fine  address,  excellent  English  education,  and  of  unswerving 


28G  PRACTICAL   BAJ)fKIXG. 

integrity  of  character.  To  do  the  work  well  in  such  a  position  as  we 
have  in  view  requires  a  banking  eiducation;  that  is,  the  officer  who 
steps  into  a  place  of  this  sort  almost  invariably  steps  out  of  what  may 
be  termed  a  long  service  of  apprenticeship  in  which  he  has  been  able 
to  earn  only  an  apprentice's  salary — the  pay  of  a  junior  clerk.  He  is 
quite  apt  to  reach  the  good  place  when  well  on  in  manhood,  and,  if  he 
have  average  health  and  strength,  the  years  that  remain  to  him  ere  he 
•wears  out  or  becomes  in  the  natural  course  of  things  less  able  than  he 
once  was  to  swing  through  the  work  of  his  highly  responsible  position, 
are  none  too  many  for  him  in  which  to  do  the  work  of  putting  by  a 
little  something  for  the  rainy  day  which  comes  to  all  such  workers. 

Again,  the  bank  officer  has  to  give  bonds — bonds  which  are  really 
costly  to  him  whether  furnished  by  paid  guarantee  companies  or  by 
generous  friends.  In  the  one  case  he  pays  money  for  them;  in  the 
other  he  reluctantly  places  himself  under  obligations  which  cannot  be 
counted  for  nothing. 

The  social  position  of  a  bank  officer — a  social  position  which  may  be 
said  to  be  directly  consequent  upon  his  occupation — entails  upon  him 
expenses  which  cannot  be  shaken  off.  He  must  dress  well,  be  well 
associated  out  of  the  bank,  and  in  countless  ways  have  expenses  thrust 
upon  him  which  he  could  easily  shake  off  were  his  position  a  less 
prominent  one. 

I  shall  not  claim  originaUty  for  these  points  and  am  glad  to  be  able 
to  quote  from  others  in  my  support.  I  know  of  no  better  presentation 
of  the  subject  than  that  made  by  John  Stuart  Mill  in  the  following 
from  his  "Principles  of  Political  Economy:" 

"A  clerk  from  whom  nothing  is  required  but  the  mechanical  labor 
of  copying,  gains  more  than  an  equivalent  for  his  mere  exertion  if  he 
receives  the  wages  of  a  bricklayer's  laborer.  His  work  is  not  a  tenth 
part  as  hard,  it  is  quite  as  easy  to  learn,  and  his  condition  is  less 
precarious,  a  clerk's"  place  being  generally  a  place  for  life.  The  higher 
rate  of  his  remuneration,  therefore,  must  be  partly  ascribed  to 
monopoly,  the  small  degree  of  education  required  being  not  even  yet 
so  generally  diffused  as  to  call  forth  the  natural  number  of  competitors, 
and  partly  to  the  remaining  influences  of  an  ancient  custom,  which 
requires  that  clerks  should  maintain  the  dress  and  appearance  of  a 
more  highly  paid  class.  It  is  usual  to  pay  greatly  beyond  the  market 
price  of  their  labor  all  persons  in  whom  the  employer  wishes  to  place 
peculiar  trust,  or  from  whom  he  requires  something  besides  their  mere 
services.  For  example,  most  persons  who  can  afford  to,  pay  to  their 
domestic  servants  higher  wages  than  would  purchase  in  the  market  the 
labor  of  persons  fully  as  competent  to  the  work  required.  They  do 
tliis,  not  from  mere  ostentation,  but  from  reasonable  motives — because 
they  desire  that  those  they  employ  should  serve  them  cheerfully,  and 
be  anxious  to  remain  in  their  service — because  they  do  not  like  to 
drive  a  hard  bargain  with  people  whom  they  are  in  constant  inter- 


SOME    WORDS    OX    MAXAGEMEN'T,  287 

course  with — and  because  they  disUke  to  have  near  their  persons,  and 
continually  in  their  sight,  people  with  the  appearance  and  habits 
which  are  the  usual  accompaniments  of  a  mean  remuneration.  Similar 
feelings  operate  in  the  minds  of  men  in  business  with  respect  to  their 
clerks  '' 

Mr.  Gilbart  adds : 

"There  would  be  considerable  difllculty  in  apy lying  the  rules  laid 
down  by  political  economists  with  regard  to  the  wages  of  labor  to  the 
case  of  bank  clerks.  A  banker  does  not  hire  a  clerk  because  he  is  the 
cheapest  man  he  can  get,  nor  does  he  dismiss  him  as  soon  as  he  can  get 
another  man  to  do  the  same  work  at  a  lower  price.  He  would  not  find 
it  to  his  interest  to  do  this ;  for  his  work  is  of  a  peculiar  kind.  His 
clerks  must  have  a  certain  degree  of  education,  and  of  manner,  and  be 
taken  from  a  certain  class  in  society.  They  are  not  allowed  to  engage 
in  any  other  employment.  They  have  to  maintain  a  respectable 
appearance.  They  must  be  quahfled  not  merely  for  the  lowest  post  in 
the  bank,  but  must  be  prepared  to  take  higher  posts  should  vacancies 
occur.  And  in  every  post  they  are  entrusted  with  a  large  amount  of 
property,  and  upon  their  integrity  and  prudence  much  reliance  must 
at  all  times  be  placed. 

All  these  circumstances  serve  to  show  that,  in  fixing  the  amount  of 
their  salaries,  the  banker  should  be  anxious  to  eiT  (if  he  errs  at  all) 
on  the  side  of  liberality. 

BANK  CLERKS.  AND  MARRIAGE. 

The  young  man  who  in  this  country  applies  for  a  situation  in  a 
bank,  where  the  position  is  a  subordinate  one  paying  but  a  small  salary 
— a  salary  fitted  to  a  low  round  in  the  ladder  of  promotion — is  often 
asked  by  Managers  and  Directors  a  great  many  questions  relative  to 
his  general  way  of  life,  surroundings,  home  status,  whether  he  is  married 
or  single,  etc. 

But  beyond  these  preliminary  investigations,  which  often  have  con- 
siderable to  do  with  coming  to  a  decision  regarding  the  fitness  of  an 
applicant  for  a  position  in  a  bank,  there  is  not  apt  to  be  a  very  close 
inspection  of  the  home  ways  of  bank  officers.  Once  in  a  position  in  a 
bank,  the  junior  oflficer,  who  has  entered  the  service  as  a  single  man, 
takes  the  question  of  whether  he  shall  get  married  into  his  own  hands 
and  on  his  own  financial  responsibiUty  without  consulting  Boards  of 
Directors  or  any  one  else.  A  junior  officer  who  becomes  a  married 
man,  if  he  is  a  promising  and  deser\ang  young  man,  is  quite  apt  to 
receive  from  observing  Directors  a  recognition  of  his  change  of  circum- 
stances in  the  shape  of  a  slight  advance  in  salary,  an  advance  which  is 
often  repeated  when,  as  time  passes,  the  young  clerk  becomes  more  and 
more  a  family  man. 

This  is  about  all  there  is  to  be  said  regarding  the  relation  of  banks  as 
employers  to  the  question  of  the  marriage  of  bank  officers. 

In  England  matters  in  this  regard  take  on  a  different  aspect.     This 


288  PRACTICAX    BANKING. 

point  is  amusingly  illustrated  by  the  following  significant   paragraph 
from  a  London  newspaper : 

The  London  and  Provincial  Bank  has  passed  the  following  resolution  : 

"  The  Board  being  of  opinion  that  it  is  on  many  grounds  inexpedient  for  clerks 
employed  by  the  bank  to  contract  marriages  on  insufficient  means, 

"  Resolved,  As  a  general  rule,  but  subject  to  any  exceptional  circumstances  which 
may  induce  the  Board  to  dispense  ^\ith  such  rule,  that  in  future,  if  any  member  of  the 
staff  whose  income  is  less  than  £150  a  year  shall  marry,  he  shall  be  disqualified  from 
continuing  in  the  bank's  service,  and  will  accordingly  be  required  to  retire  from  it."' 

An  American  Board  of  Bank  Directors  which  should  pass  a  resolu- 
tion of  this  character  would  be  pretty  sure  to  follow  it  up,  in  case  of 
the  marriage  of  a  clerk  whom  they  esteemed,  with  a  vote  at  once  raising 
his  salary  to  the  sum  which  they  had  decided  was  sufficient  to  support 

a  family. 

BANK    OFFICERS'    VACATIONS. 

All  bank  officers  should  be  given  vacations  of  at  least  two  weeks 
annually.  They  are  of  advantage  to  the  bank  because  they  give  an 
opportunity  to  deputize  the  work  of  absent  officers  to  new  hands,  a 
change  which  is  a  benefit  to  the  institution,  since  it  absolutely  inter- 
feres with  the  existence  of  any  rust  of  management  or  the  prevalence 
of  dishonest  practices  in  the  department  into  which  the  fresh  worker 
is  introduced.  Vacations  are  good  for  the  employee  because  they 
recreate  his  mind  and  improve  his  health,  rendering  him  the  better 
able  to  do  the  work  of  his  position  Avhen  he  returns. 

In  organizing  the  stall  of  a  bank,  these  furloughs  should  be  kept  in 
view,  and  it  also  should  be  fully  borne  in  mind  that  there  is  another 
contingency  to  be  thought  of,  and  that  is  the  liability  to  illness,  which 
a  distinguished  Avriter  has  described  as  being  one  of  the  most  promi- 
nent of  the  wastes  and  burdens  of  life. 

Officers  should  arrange  among  themselves  as  far  as  possible  the  time 
of  their  annual  furloughs,  that  is,  just  when  each  shall  go;  but  these 
arrangements  should  be  subject  to  the  advice  and  approval  of  the 
management  of  the  bank,  the  Board  of  Directors  voting  formally  on 
each  leave  of  absence  so  that  there  shall  be  on  the  Directors' records  a 
minute  of  the  period  and  length  of  absence  of  each  officer. 

The  Cashier  should  see  that  arrangements  are  made  so  that  no  one 
officer  shall  do  more  than  his  share  of  the  extra  work  arising  out  of 
vacations.  It  is  generally  an  excellent  plan  for  the  officers  to  have  an 
understanding  so  as  to  be  able  to  arrange  this  matter,  also,  among 
themselves,  subject,  of  course,  to  the  revision  and  supervision  of  the 
Cashier.  Where  there  is  not  a  sufficiently  strong  force  to  carry  along 
vacation  work  in  the  way  suggested,  outside  help  should  be  generously 
taken  on.  In  our  cities  and  large  towns  there  are  always  substitutes 
anxious  to  obtain  vacation  work. 

In  some  banks  there  is  shown  such  a  degree  of  parsimony  in 
arranging  work  for  the  pm-pose  of  allowing  vacntions  that  the  officers 
who  are  worked  too  hard  on  their  return  to  make  up  for  lost  time  and 


SOME    WORDS    O'S    MANAGEMENT.  289 

who  do  their  own  and  other's  work  during  vacation  seasons  would,  if 
they  had  tlieir  way,  do  away  entirely  with  their  annual  periods  of 
absence.  In  banks  where  the  situation  is  of  this  character  the  long 
Summer  months  wliich  are  generally  the  periods  of  bank  vacations 
are  looked  forward  to  by  the  clerks  with  anxiety  rather  than  with 
pleasure,  and  they  all  breathe  freer  and  feel  a  sense  of  relief  when  the 
vacation  season  is  over.  The  fault  in  such  cases  often  rests  with  some 
chief  executive  officer  who,  from  want  of  judgment  or  absence  of 
proper  sympathy,  does  not  use  his  influence  to  see  to  it  that  the  bank 
in  his  charge  has  help  enough  of  the  right  description.  It  is  very  poor 
economy  to  run  a  bank  short-handed,  and  neither  the  shareholders 
who  own  the  bank  nor  the  Directors  who  represent  them  are  apt  to 
favor  such  a  policy. 

It  has  been  urged  by  some  very  intelligent  bankers,  and  others 
who  have  given  this  point  attention,  that  bank  olficers'  regular 
vacations,  wliich  take  them  away  from  their  customary  duties  for  a 
couple  of  weeks  or  so  every  year,  are  of  questionable  advantage  to 
them,  since  these  absences  from  work  so  throw  them  out  of  the  habit 
of  doing  their  regular,  daily  routine  of  labor  at  the  bank  as  to  render  it 
very  hard  for  them  when  they  come  back  into  the  harness.  Without 
doubt  there  is  some  force  in  this  objection.  And  it  may  also  be  said  in 
further  argument  of  the  same  tenor,  that  the  bank  officer,  in  returning 
from  his  long  vacation,  which  may  have  left  liim  a  little  out  of  practice 
at  writing,  ciphering,  and  counting  money,  generally  finds  that  he 
must  at  once  bend  to  double  work,  for  it  is  vacation  season,  and  his 
return  is  likely  to  be  the  signal  for  some  other  officer  to  leave  for  a 
furlough  of  the  same  sort. 

A  writer  in  ' '  Blackwood  "  not  long  ago  took  the  ground  that  it  was 
very  poor  policy  for  bank  officers,  professional  men,  etc. ,  who  have 
very  regular  daily  duties,  to  leave  them  for  vacations  of  longer  than  a 
day  or  so  at  a  time,  until  the  period  arrived  when  they  could  throw 
do^vn  their  business  and  retire  permanently ;  and  the  reasons  advanced 
by  this  writer  were  about  the  same  as  those  I  have  just  named. 

But,  notwithstanding  these  and  other  arguments  in  the  same  line, 
the  privileges  of  bank  clerks  in  the  way  of  vacations  are  steadily,  if 
slowly,  increasing,  and  properly  so. 

The  constant  tendency  is  toward  seeing  more  and  more  clearly  that 
to  work  well  the  worker  must  have  occasional  periods  of  rest  and 
change,  and  the  bank  cle^k,  with  all  the  other  -workers,  is  the  gainer 
by  this  growing  sentiment. 

It  is  well  to  consider  all  these  points,  but  I  am  far  from  willing  to 
acknowledge  that  the  arguments  against  vacations  which  I  have  just 
quoted  are  of  a  convincing  character.  The  mental  stimulus  to  a  bank 
officer  (whose  daily  routine  of  work  must  inevitably  be  of  a  monot- 
onous and  wearying  character)  of  a  couple  of  weeks  in  a  year  entire 
absence  from  bank  work,  is  of  so  beneficial  a  value  as  to  be   with 


290  PRACTICAL    BAXKIXG. 

difficulty  overestimated;  and  no  bank  officer  who  has  opportunities 
ior  such  a  change  and  relief  should  ever  fail  of  taking  advantage  of 
them.  There  is  Uttle  need  in  such  eases  of  his  traveling  far  or  spending 
large  amounts  of  money.  Wh.it  he  specially  needs  is  change  of  scene; 
and,  if  he  is  a  city  man,  and  the  season  is  propitious,  he  cannot  do 
better  than  go  into  the  country  and  enjoy  nature's  green  fields,  woods 
and  skies  — taking  his  family  with  him,  if  he  is  so  fortunate  as  to  have 
one,  giving  them  also  a  season  of  rest  and  change,  and,  in  new  scenes, 
cultivating  an  acquaintance  with  them  that  is  undisturbed  by  daily 
absorbing  business  cares. 

Bank  officers,  long  in  the  ruts,  and  with  many  hooks  that  bind 
them  down  to  regular  home  duties  and  cares,  often  find  it  difficult  to 
start  on  a  vacation,  and  often  say  they  don't  know  where  to  go.  But 
it  is  certainly  very  evident  that  the  m.an  who  thus  places  hunself 
completely  under  the  harrow  of  business  is  most  in  need  of  being 
shaken  out  of  the  grooves  in  which  he  has  fixed  himself — is  really  most 
in  need  of  a  vacation  when  he  is  the  most  averse  to  taking  one. 

In  the  matter  of  the  length  of  vacations,  here  is  an  idea  which  I 
picked  up  in  the  Bank  of  England.  That  institution  has  to-day  one 
thousand  employees  in  its  old  headquarters  in  Threadneedle  street.  I 
do  not  count  the  officers  in  its  branches.  At  one  time,  say  in  1820,  it 
had  1,300  employees.  The  average  number  of  employees  away  on 
their  holidays,  all  the  time,  is  fifty. 

Thmk  of  it,  a  steady  absence  of  fifty  officers  on  vacations.  In  our 
banks,  where  the  numbers  employed  are  comparatively  small,  one  or 
two  is  the  average  number  away. 

But,  I  started  to  say,  that  in  the  Bank  of  England  these  grants  of 
holidays  are  of  unequal  length — are  graded  according  to  the  time  in 
which  the  officer  has  been  at  work  in  the  Bank, — the  oldest  workers 
ha\'ing  the  longest  vacations.  It  seems  to  me  there  is  an  idea  here 
worth  looking  into  on  this  side  of  the  water.  It  may  be  that  the 
veteran  officer  is  not  only  entitled  to,  but  really  more  in  need  of,  a 
longer  vacation  than  the  lively  young  junior  clerk. 

But  I  will  not  attempt  to  do  more  than  throw  this  matter  out  for 
the  consideration  of  my  experienced  banking  readers. 

Here  is  another  vacation  idea  which  may  seem  sensible.  Why  may 
not  large  banks  so  arrange  vacation  matters  that  at  least  one  of  its 
officers  shall  each  year  have  a  longer  vacation  than  the  others — say 
time  enough  to  get  a  little  more  than  the  usual  rest  and  change,  and 
to  go  a  longer  journey  during  the  furlough  ?  The  officers  could 
arrange  this  little  matter  among  themselves  if  so  permitted;  and,  in 
time,  all  would  have  the  extension  without  setting  up  any  troublesome 
precedents  for  others  to  find  fault  with. 

BANK    HOURS. 
In  New  York  the  banks  open  at  10  o'clock  in  the  morning  and  close 
at  3  o'clock  in  the  afternoon.     In  Boston  the  banks  nominally  open  at 


SOME   WORDS    ON    MANAGEMENT.  291 

9  o'clock  in  Winter  and  10  o'clock  in  Summer.  But,  under  the 
Clearing-House  arrangements  of  that  city,   settlements  are  made  at 

10  o'clock  all  the  year  round,  and  so  its  banks  may  be  reported  as 
openmg  for  business  at  about  9  o'clock  in  Winter  as  well  as  in  Summer, 
since  a  later  hour  of  begiiuiing  work  would  not  give  them  time  to  get 
ready  for  the  Clearing-House. 

With  two  or  three  exceptions  the  banks  of  Boston  shut  at  2  p.  M. 
A  few  of  its  banks  keep  open  until  3  P.  M.  There  have  been  periodical 
attempts  made  during  the  last  thirty  or  forty  years,  if  not  longer,  to 
estabUsh  a  custom  of  keeping  all  the  Boston  banks  open  until  3  P.  M., 
after  the  New  York  style.  But  it  would  hardly  seem  consistent  to 
adopt  New  York  bank  time  at  the  end  of  the  route — as  far  as  closing 
business  is  concerned — and  not  follow  New  York  bank  time  in  opening 
business.  But  it  will  be  a  long  while  before  Boston  falls  into  the 
habit  of  not  buckling  down  to  business  before  10  o'clock  in  the 
morning,  as  is  the  New  Y'^ork  way  of  business  life.  Boston  is  decidedly 
an  hour  earlier  than  New  York  in  its  morning  business  habits,  and  is, 
therefore,  consistent  in  shutting  its  banks  at  2  P.  M.  instead  of  3  p.  M. 
It  is  just  as  natural  and  easy  to  do  Boston's  banking  business  between 

9  and  2  o'clock  as  it  is  for  the  New  York  banks  to  do  theirs  between 

10  and  3  o'clock.  In  either  place  there  is  a  large  class  of  dealers  who 
would  always  be  late  were  the  banks  to  run  until  midnight. 

In  the  cities  of  the  South  and  West  the  banks  generally  run  on 
New  York  hours — 10  A.  M. ,  until  3  P.  m. 

In  country  towns,  everywhere  in  the  States,  banks  are  in  the  habit 
of  shutting  up  awhile  at  12  or  1  o'clock  for  a  dinner  hour  for  the 
oflB.cers,  though  the  habit  is  by  no  means  general.  This  is  a  good 
method,  looked  at  from  a  dietetic  stand-point.  The  old-fashioned 
hour  of  meals,  which  gave  a  dinner  at  noon-day,  can  not  easily  be 
improved  on. 

About  half  the  bankers  of  the  United  States  are  under  the  harrow 
of  dyspepsia,  caused  by  the  want  of  a  good  dinner  at  the  proper  time. 
Too  many  of  them  run  along  year  after  year  doing  long  hours  of  work 
in  the  time  that  stretches  between  the  opening  and  closing  of  their 
banks  on  the  poor  support  of  a  light  breakfast  eaten  in  haste  with 
little  appetite. 

Closing  the  banks  on  Saturdays  at  one  o'clock,  or  even  earlier,  has 
always  seemed  to  me  an  excellent  idea,  particularly  for  those  located 
in  cities  or  large  towns. 

It  is  very  proper  that  New  Y^ork,  our  great  fmancial  centre,  .should 
inaugurate  the  half-holiday  idea  in  this  country,  and  when  its  success 
is  clear,  doubtless  other  localities  will  follow  with  similar  legislation. 

The  London  bank  clerks  have  recently  petitioned  their  various  Boai'ds 
of  Directors  to  close  early  on  Saturdays,  and  the  press  of  London 
has  favored  this  early-closing  plan  with  considerable  unanimity.  The 
bank  Managers  and  many  of  the  merchants  oppose  the  move,  and  its 


292  PRACTICAL    BAXKIXG. 

success  is  doubtful.  The  bank  officers  of  London,  and  of  the  United 
Kingdom  generally,  work  long  hours.  They  do  not  commence  as  early 
as  here,  but  they  usually  work  later.  Their  general  habit  is  to  get  a 
solid  lunch  at  about  one  o'clock,  and  to  dine  at  six  o'clock.  The  six 
o'clock  dinner  is  a  very  substantial  ajQfair  in  England,  and  is  not 
followed  by  much  more  in  the  way  of  evening  teas,  lunches,  or  suppers, 
except  in  the  ease  of  fashionable,  unbusiness  people,  who  turn  night 
into  day,  going  often,  in  the  ''season,"  to  both  the  play  and  parties  on 
the  same  evening.  The  last-named  classes  do  not  think  of  going  to 
bed  before  midnight,  and  sleep  late  in  the  mornings,  but  these  habits 
of  sleeping  are  not  those  of  the  bankers  and  merchants  of  London. 

The  legal  view  of  banking  hoiirs  is  very  clearly  set  forth  in  the 
following  case : 

The  bank  which  held  the  unpaid,  matured  and  endorsed  note 
handed  it  to  its  Notary  to  protest  at  2 :30  o'clock,  which  was  half  an 
hour  after  the  regular  closing  hours  of  all  the  banks  in  the  place.  The 
note  was  drawn  payable  at  a  neighbor  bank,  and  at  a  httle  after  2 :30 
o'clock  the  demand  was  there  made,  and  notice  of  its  non-payment 
sent  promptly  thereafter  to  all  the  endorsers.  At  the  hour  of  the 
notarial  presentation  of  this  note  to  the  bank  where  it  was  made 
payable  the  doors  of  the  institution  were  open,  and  several  of  its 
leading  officers  were  there  busOy  at  work,  one  of  whom  seemed  to 
have  sufficient  knowledge  and  authority  to  answer  the  demand  with  a 
prompt  and  decided  reply  of  "no  funds. "  So  far  so  good.  But  the 
note,  which  was  one  with  a  very  bad  promise,  was  destined  to  give  its 
owners  considerable  trouble  with  its  endorsers.  The  endorsers,  wishing 
to  evade  their  responsibility,  availed  themselves  of  the  pomt  Avhich 
had  come  to  their  ears  that  a  demand  had  not  been  made  uj)on  its 
promisor  for  payment  at  the  bank  where  it  was  made  payable  during 
that  bank's  regularly  advertised  business  hours.  A  long  legal  contest 
followed,  which  brought  up  for  pretty  thorough  discussion  and  decision 
the  questions  of  what  are  a  bank's  regular  hours  of  business  and  who 
and  what  fixes  the  same. 

There  are  no  statutes  defining  the  business  hours  of  a  bank.  The 
Directors  of  a  bank,  by  by-laws,  declare  tliat  certain  hom-s  shall  be 
kept  by  the  bank  in  its  general  dealings  with  the  public  and  in  its 
business  of  receiving  deposits  and  paying  checks.  Custom  regulates 
all  keeping-open  points  outside  of  these  by-law  hours. 

In  the  case  we  have  reference  to,  the  Court  finally  very  justly  and 
correctly  ruled  that,  if  a  bank  was  in  the  habit  of  keeping  open  untU 
a  certain  hour  after  its  defined  time  of  closing,  and  responsible  officers 
were  in  the  habit  of  staying  in  the  bank  to  attend  to  their  duties  up  to 
that  hour,  ready  and  competent  to  respond  to  such  demands,  a  notarial 
demand  naade  at  such  an  hour  was  a  binding  one. 

In  old-times  —in  ante-Clearing-House  days — the  Boston  bank  officers 
did  not,  as  a  general  thing,  do  a  great  deal  before  10  o'clock  in  the 


SOME    WORDS    Oy    MANAGEMENT. 


293 


morning.    Their  custom  in  tliis  regard  may,  possibly,  have  been  set  up 
early  in  the  present  century. 

The  following  curious  document  (see  Form  73),  bearing  date  at  that 
time,  throws  a  little  light  on  this  subject  as  well  as  on  the  ways  and 
manners  of  the  Boston  bank  clerks  of  that  early  period  when  there 
•were  only  two  or  three  banks  in  Boston.    The  paper  tell  its  own  story  : 


Form  73. 

The  following  was  voted  at  the  next  meeting  of  the  Board  of  Directors : 

Voted,  In  consequence  of  the  application  of  the  officers  of  the  bank  that,  ttntil 
the  1st  of  April  next,  the  bank  be  opened  at  10  o'clock  in  the  morning, 

Voted,  That  the  good  conduct  of  the  officers  of  the  bank,  so  far  as  the  same 
has  come  to  their  knowledge,  merits  the  entire  approbation  of  the  Directors,  and 


294  PRACTICAL    BAXKIXG. 

that  the  said  officers  respectively  he  re(iuested  to  accept  the  tlianks  of  the  Board 
for  their  attention  and  assiduity. 

Voted,  That  the  Cashier  communicate  the  preceding  votes  to  the  officers  of 
the  bank. 

This  petition  and  the  reply  to  it  certainly  show  a  kindly  feeling  on 
the  part  of  both  officers  and  Directors  of  this  most  excellent  old  bank 
— a  bank  which  still  does  an  active  business,  and  stands,  as  it  has 
always  stood,  among  the  first  in  its  city.  Every  man  who  signed  this 
paper  is  dead.  But  many  of  these  petitioners  were  well-knoAvn  to  the 
bankers  and  business  men  of  the  present  day.  Some  of  them  after- 
wards became  very  prominent  bankers. 

Mr.  Lash  Uved  to  be  the  oldest  active  Book-keej)er  in  Boston. 

M.  S.  Parker  was  Casliier  of  the  Suffolk  Bank,  at  the  period  when 
it  was  conducting  what  is  known  as  the  ' '  Sullolk  Redemption  System. " 

Chester  Adams  was  afterwards  a  prominent  Boston  bank  President. 

BANK   LUNCH-ROOMS. 

Bank  lunch-rooms  are  a  more  common  thing  with  us  than  they 
were  in  former  times.  In  fact,  twenty  or  thirty  years  ago  such  insti- 
tions  were  hardly  known  at  all  in  this  country. 

The  Bank  of  England  has  a  very  fine  dining,  or  lunch-room,  where 
all  its  many  hundred  employees  are  served  with  an  excellent  mid-day 
meal.  I  had  an  interest  in  looking  at  the  arrangements  of  this 
commodious  eating  hall  when  I  visited  the  old  bank,  and  I  found  its 
arrangements  of  the  neatest  and  most  attractive  character,  and  the 
food  served  most  excellent,  though  plain.  Beer,  bread,  cheese  and 
cold  meats  were  the  principal  articles  served. 

It  is  not  desirable  to  have  bank  officers  out  of  the  bank — or,  at  least, 
out  of  immediate  call— during  bank  hours. 

In  banks  where  the  working  hours  are  long,  it  is  certainly  an 
excellent  idea  to  have  a  lunch-room  connected  with  the  banking 
rooms,  and  furnished,  at  the  proper  time,  with  a  substantial  lunch  for 
the  officers — a  lunch  to  which  they  can  repair  in  turn  and  enjoy  it  at 
their  ease,  being  allowed  a  reasonable  time  for  it,  which  reasonable 
time  can  be  all  the  more  conveniently  allowed  by  the  bank  since  it 
has  its  officers  right  at  hand  in  ease  of  a  sudden  demand  for  any  one 
of  them. 

I  have  mentioned  beer  as  being,  of  course,  one  of  the  substantials 
and  inevitables  of  an  English  banker's  lunch.  Beer  is  certainly  rather 
a  mild  stimulant,  and  there  may  be  something  in  the  English  climate 
that  conduces  to  Enghsh  beer  consumption,  and  possibly  to  its 
innocent  consumption.  But  I  am  writing  for  this  side  of  the  water. 
Here  my  latitude  is  certainly  wide  enough.  And  I  have  no  hesitation 
m  saying  that  the  American  bank  clerk  is  better  without  than  with 
sthnulants,  be  they  mild  or  strong.  The  bank  officer,  in  health  and 
strength,  is  the  last  man  that  should  indulge  in  their  use.  He  needs, 
pre-eminently,  a  clear  head  and  a  steady  hand,  a  cool  grasp  of  his 


SOME    WORDS   OX    MA:!^AaEMENT.  295 

business,  and  the  steady  presence  of  all  the  best  faculties  of  his  nature. 
Of  all  these  ho  is  more  sure  if  he  carefully  puts  aside  all  stimulants. 

"Where  bank  hours  are  not  lonc^,  it  is  better  for  the  bank  officer 
to  eat  but  Uttle,  if  anything,  between  his  breakfast  and  the  hour  when 
he  can  shut  his  ledgers  and  turn  the  keys  upon  his  vaults.  In  order 
to  stand  up  well  under  the  long  strain  that  comes  upon  him,  as  he  toils 
at  the  bank  from  morning  till  dinner,  he  should  endeavor  to  gi'OAV  into 
the  habit  of  fortifying  himself  with  a  substantial  breakfast,  and  as  I 
have  elsewhere  said  may  acquire  appetite  and  a  relish  for  this  meal  by 
early  rising  and  a  taste  of  out-of-door  hfe  in  the  moi'ning. 

TREASURY    AGENTS. 

Treasury  agents  for  National  banks,  whose  duties  are  to  witness 
the  destruction  of  bills  redeemed  and  to  make  annual  examuiations  of 
United  States  bonds  on  deposit  at  Washington  as  security  for  circula- 
tion, are  formally  selected  by  the  banks  themselves,  and  under  Sections 
5166  and  5184  of  the  Revised  Statues  of  the  United  States  are  duly 
made  their  attorneys  for  the  discharge  t)f  the  commissions  we  have 
described. 

With  regard  to  the  matter  of  selection  and  giving  conunissions  to 
these  agents  there  is  a  point  which  needs  a  little  explanation.  The 
Bank  Act  provides  that  they  shall  be  chosen  and  made  the  banks' 
attorneys  under  such  regulations  as  the  Treasury  Department  may 
establish.  The  Treasury  Department  simply  forwards  to  the  banks  a 
blank  commission  for  these  agents  Avhich  is  to  be  filled  out  and  signed 
by  the  Cashier.  The  proper  procedure  in  such  cases  is  for  the  Directors 
of  the  banks,  by  a  regular  vote,  to  make  a  selection  of  their  agents, 
and  authorize  the  Cashiers  or  Presidents  to  sign  the  papers  making 
them  their  agents  for  the  work  in  question. 

It  may  come  withm  the  scope  of  the  regular  duties  of  Presidents  or 
Casliiers  to  sign,  as  representatives  of  their  banks,  documents  con- 
stituting parties  their  bank's  attorneys  for  some  routine  duties,  such  as 
completing  transfers ;  but  where  a  selection  and  action  of  the  character 
we  have  described  is  to  be  undertaken  a  regularly  recorded  vote  of  the 
Board  of  Directors  is  a  more  proper  course. 

This  matter  of  selecting  these  Washington  agents  has  grown  to  be 
such  a  routine  business  with  the  banks  that  it  is  possible  they  have  not 
in  all  cases  given  very  close  attention  to  it.  Very  particular  care 
should  be  taken,  and  only  men  of  the  highest  standing  in  point  of 
character  and  experience  should  be  selected  for  the  duties. 

Our  banks  should  also  bear  in  mind  that  these  approved  agents 
hold  themselves  in  readiness  to  furnish  early  Washington  information 
regarding  any  matters  of  special  interest  to  the  banks.  They  are  as  a 
class  gentlemen  of  wide  experience  and  lai-ge  intelligence  in  banking 
matters,  and  their  facilities  for  investigating  points  in  banking  which 
have  a  Washington  bearing  are  quite  extensive.  They  all  undertake 
to  furnish  information   to  their  patrons   on  bank  matters  without 


296  PRACTICAI.   BACKING. 

cliargc.  Their  regular  schedule  of  fees  for  witnessing  the  destruction 
of  bills  and  examining  bonds  is  as  follows :  Banks  with  a  capital  of 
$100,000  or  less,  §3  j^er  year;  banks  with  a  capital  from  $100,000  to 
$200,000,  $10  per  year;  banks  with  a  capital  from  $300,000  to $400,000, 
$15  per  year;  banks  with  a  capital  from  $400,000  to  $500,000,  $20  per 
year;  banks  with  a  capital  over  $500,000,  $25  per  year. 

AGENCIES    OR   BRANCHES. 

The  branch  bank  is  to  be  seen  in  perfection  under  the  Enghsh 
banking  system ;  and  in  Canada,  and  in  other  of  the  British  colonies, 
the  methods  of  the  mother  country  in  this  regard  have  been  fully 
copied.  Our  National  banks — in  some  points  only  branches  of  one 
great  central  United  States  bank — are  in  other  respects  separate,  indi- 
\'idual  organizations.  Those  of  them  having  a  large  capital,  and 
established  in  the  great  cities  where  money  is  apt  to  centre,  sometimes 
agitate  the  idea  of  setting  up  branches  in  towns  and  cities  in  outlying 
States  where  rates  for  money  rule  high,  and  where  the  financial  wants 
of  the  comm.unities  are  of  a  pressing  character.  There  seems  to  be 
nothing  in  the  Bank  Act  to  prevent  such  movements,  yet  from  the 
first  the  banking  department  lias  set  its  face  against  such  branching- 
out  ideas. 

The  plan  of  transferring  stagnating  capital  of  large  and  well-man- 
aged banks  from  such  points  as  the  great  cities  of  the  East,  where 
extreme  diflO^culty  is  sometimes  experienced  in  keeping  up  their  loans 
on  home  investments,  to  branches  in  new  and  rapidly  gi'owing  points 
in  the  far  West,  where  paper  is  clamoring  for  discount,  has  certainly 
much  that  is  attractive  about  it. 

BANK   ATTORNEYS, 

It  is  an  excellent  idea  for  every  bank  to  have — what  it  is  very  com- 
mon for  the  banks  in  New  York,  Chicago,  Boston  and  other  leading 
places  to  have — a  special  lawyer  of  their  o-wti.  And  it  is  not  a  bad 
plan  to  have  him  retained  by  the  year,  at  a  regular  salary,  with,  of 
course,  the  understanding  that,  in  case  of  emergencies  arising  from  the 
precipitation  of  an  extra  amount  of  legal  work  upon  the  bank,  he  shall 
have  assistance  retained  and  paid  for  by  the  bank.  The  advantages  of 
keeping  a  regularly  salaried  soUcitor  are  almost  too  evident  to  be 
described.  There  is  hardly  a  passing  day  in  an  active  and  intelligently 
managed  bank  that  does  not  bring  with  it  some  new  question  in 
banking,  and  many  of  these  questions  have  complicated  legal  aspects 
which  could,  with  a  deal  of  satisfaction,  be  referred  to  the  solicitor. 

Then  again,  in  every  live  bank,  the  officers,  from  the  President 
down,  are  on  the  alert  to  learn  all  there  is  to  be  learned  about  banking; 
and  an  easy  and  ever-present  contracted-for  opportunity  for  any  one 
of  these  officers  to  talk  over  the  questions  of  the  legal  rights  and  duties 
of  bank  and  dealer  in  such  matters  as  the  management  of  business  paper, 
transfer  of  shares  of  the  bank,  and  shares  held  as  collateral,  etc.,  etc.. 


SOME    WORDS    OX    MANAGEMENT.  297 

would  be  of  great  advantage  to  all  concerned.  As  it  is,  those  banks 
that,  for  the  sake  of  economy,  run  along  without  any  attorney,  are 
placed  in  the  undignified  position  of  often  being  obhged  to  steal  their 
law  from  casual  legal  customers — picking  up,  in  some  cases,  no  doubt, 
carelessly  expressed  judgments,  given  without  any  sense  of  paid-for 
responsibility — what  old  Chief  Justice  Parsons  termed  * '  horse-back 
opinions." 

The  economy  of  the  plan  I  have  named  must  be  evident ;  for  a  live 
bank  counsel  would  soon  become  very  expert  in  banking  law,  would 
have  a  special  interest  in  keeping  his  bank  out  of  lawsuits,  and,  on  the 
whole,  would  be  pretty  sure  to  fully  earn  his  salary  by  his  advice  and 
general  services. 

NATIONAL   BANK   EXAMINERS. 

When  a  National  Bank  Examiner  enters  a  bank  at  the  present  time 
for  the  purpose  of  seeing  that  everything  there  is  as  it  shoidd  be  he  at 
once  takes  full  possession.  If  it  is  a  bank  having  a  large  business  and 
many  departments — departments  which  are  inevitably  mixed  and 
intertwined  with  each  other  in  their  every-day  transactions — he  stops 
the  work  of  each  division  and  puts  the  cash  and  securities  belonging  to 
them  under  his  private  seal.  By  doing  this  he  effectually  guards 
against  any  concealment  by  defaulting  officers  of  deficiencies  in  their 
own  department  by  temporary  and  secret  transfers  of  property  from 
other  divisions  of  work. 

A  brief  explanation  of  what  has  been  done  by  defaulters  in  banks 
by  the  methods  just  alluded  to  will  give  a  very  good  idea  of  what 
might  be  agam  and  again  repeated,  with  variations,  if  the  Bank 
Examiner's  checks  and  guards  just  described  were  not  now  invariably 
put  in  force. 

The  Receiving-Teller  of  a  bank,  which  was  imdergoing  an  exam- 
ination that  occupied  several  days,  received  back  his  cash  from  the 
Examiner,  who  had  thoroughly  gone  through  it  and  found  it  correct 
in  all  points.  The  next  day  the  same  Examiner  passed  through  the 
loan  of  the  bank  and  examined  all  the  notes  discounted  and  the 
collateral  security  attached  and  reported  them  all  correct  and  in 
harmony  with  the  books  of  the  institution.  But  dishonest  collusion 
existed  in  this  bank  between  the  Teller  and  Discount  Clerk,  and 
important  deficiencies  in  collateral  belonging  to  the  loan  were  secured 
fi-om  detection  by  the  aid  of  cash  temporarily  borrowed  from  the 
Teller  after  his  cash  had  passed  under  the  Bank  Examiner's  scrutiny 
and  before  the  loan  was  examined.  It  is  easy  to  see  how  cash  and 
vouchers  may  be  made  to  do  double  duty  in  the  hands  of  cunning 
defaulters  Avhere  there  is  a  lack  of  proper  \'igilance  on  the  part  of  the 
Bank  Examiner. 

The  experienced  and  sagacious  Bank  Examiner  is  always  sure  to  be 
alert  in  the  matter  of  watching  in  an  unobtrusive  manner  the  ways, 
methods  and  general  carriage  of  the  bank  officers  who  are  around  him 


298  PRACTICAIi   BAJXKIXG, 

in  the  bank  he  is  inspecting.  It  may  be  that  at  times  he  recalls  an 
experience  of  this  character. 

A  Bank  Examiner  became  anxious  about  the  discount  department 
of  a  bank  he  was  examining.  He  became  suspicious,  from  certain 
circumstances,  that  the  head  of  the  department  was  trying  to  do 
something  ^vrong.  Placing  a  check  in  the  right  place  at  the  proper 
time  he  detected  this  officer  endeavoring  to  smuggle  into  the  bank 
United  States  bonds  which  he  had  borrowed  somehow  to  make  up 
existing  deficiencies  in  his  collaterals. 

There  has  been,  particularly  within  the  last  few  years,  no  small 
amount  of  sharp  criticism  of  the  methods  and  management  of  these 
important  representatives  of  the  Treasury  Department.  This  has 
grown  out  of  the  fact  that  in  many  instances— instances  which  have 
become  famous  banking  scandals — the  most  startling  defalcations  and 
irregularities  have  been  carried  along  in  banks  right  under  the  eyes,  as 
it  were,  of  Bank  Examiners,  and  disastrous  and  most  culpable  instances 
of  mismanagement  have  been  allowed  to  exist  where  signs  of  the 
wrong-doing  had  been  observed  and  reported  to  the  Comptroller  by 
the  Examiners. 

There  is  not  a  doubt  but  that  it  is  absolutely  impossible  for  a 
United  States  National  Bank  Examiner,  or  any  other  bank  mspector, 
to  make  such  examinations  of  our  banks  as  shall  ensure  the  pubUc, 
every  time,  that  there  are  no  defalcations  existing  or  brewing  ip  any 
of  them,  although  these  officials  can  do  much  towards  unearthing,  or 
preventing  dishonest  practices  in  the  banks. 

It  is  time  that  it  was  more  generally  understood  that  neither 
National  Bank  Examiners  nor  the  presence  m  a  bank  of  the  most 
perfect  system  of  management,  and  the  best  of  arrangements  of  checks 
and  guards  against  dishonesty  of  officials,  can  absolutely  prevent  a 
trusted  bank  officer  in  a  position  of  responsibility  from  stealing. 

Regarding  this  matter  of  the  nusmanagement  of  some  National 
banks  in  the  face  of  bank  examinations  by  the  Treasury  inspectors, 
the  situation  is  somewhat  as  follows:  A  Bank  Examiner  finds,  for 
illustration,  that  a  bank  President  is  using  too  nmch  of  the  money  of 
his  bank — has  too  much  of  his  paper  in  its  loan — and  that  he  is, 
perhaps,  deep  in  speculations  of  a  questionable  character,  which  are 
endangering  himself  and  his  bank.  The  Examiner  reports  this  to  the 
Comptroller.  The  Comptroller  writes  an  admonishing  letter  to  the 
Directors  of  the  bank.  He  does  Uttle  more  than  this,  in  very  many 
cases,  because  he  knows  that  the  Directors  have  taken  an  oath  that 
they  will  attend  faithfully  to  their  duties,  and  because  if  he  does 
anything  more  he  must  take  very  decisive  action. 

There  seems  to  be  no  half-way  position  for  him  to  take  in  the 
matter.  The  bank  must  be  allowed  to  go  on  under  the  management  of  its 
Directors,  or  it  must  be  proceeded  against  with  a  view  to  closing  it  up. 

It  might  be  well  for  Examiners,  who  have  found  banks  indulging 


SOME   WOKDS    ON    MANAGEMENT.  299 

in  practices  that  were  not  satisfactory,  but  which  they  promise  to  refrain 
from  in  future,  to  make  early  revisits  to  them  to  see  if  the  promised 
reforms  have  been  instituted. 

There  is  one  incidental  advantage  which  is  an  outcome  of  the  rela- 
tions existing  between  every  National  bank  and  the  banking  bureau  at 
Washington  that  is  of  no  small  value.  In  the  matter  of  circulating 
notes  issued,  bonds  of  the  United  States  held  as  security  for  the  same, 
and  the  maintenance  of  a  cash  redemption  reserve  fund  at  Wasliington, 
the  banks  and  the  Treasury  Department  may  be  said  to  act  as  checks 
and  guards  of  each  other. 

The  system  in  this  regard  is  of  such  an  admirable  character,  and  is 
so  well  managed,  that  there  has  not  been  an  irregularity  since  National 
banks  began  to  exist. 

When  the  National  Bank  Examiner  goes  through  a  bank  he  looks 
carefully  into  every  item  on  its  books  which  has  any  connection  with 
the  central  bureau  at  Washington.  If  he  finds  figures  which  do  not 
seem  clear  and  consistent  he  confers  at  once  with  the  Treasury  Depart- 
ment for  the  purpose  of  obtaining  explanations  and  reconcilements. 
His  final  reports  on  every  bank  go  direct  to  Washington  and  are  there 
carefully  examined  and  compared  with  those  figures  in  the  banking 
department  of  the  United  States  Treasury  relating  to  them. 

The  statements  which  the  banks  make  out  five  times  in  the  year  by 
order  of  the  Grovernment  go  through  the  same  scrutiny  at  the  Wash- 
ington banking  department,  and  are  there  carefully  examined  and 
compared  with  what  may  be  termed  the  books  of  the  great  central 
United  States  bank  at  Washington,  of  which  all  the  National  banks  of 
the  country  are  only  branches. 

It  is  not  easy  to  see  how  anything  can  long  go  wrong  or  irregularities 
occur  in  those  portions  of  National  banking  which  are  thus  made  to 
work  together — to  prove  and  try  each  other  in  the  manner  we  have 
described.  Outside  and  beyond  there  are,  of  course,  chances  for  fraud 
and  defalcation  which  experienced  bankers  fully  realize.  The  question 
often  arises  whether,  for  instance,  there  is  not  a  danger  that  National 
bank  bills  may  be  printed  surreptitiously  in  Wasliington  by  dishonest 
officials— printed  from  the  genuine  plates  of  National  bants  and  put  in 
circulation  with  forged  signatures. 

BANK   DEFALCATIONS. 

I  hope,  before  I  complete  this  topic,  to  make  myself  fully  under- 
stood when  I  say  that  a  large  degree  of  the  safety  of  a  bank,  as  far 
as  immunity  from  defalcations  is  concerned,  depends  upon  the  tone 
which  exists  within  the  bank — which  rules  in  the  administration  of 
its  internal  affairs. 

That  bank  runs  along  the  best  and  does  its  work  the  easiest,  tlie 
most  skillf  uDy  and  most  securely,  which  cultivates  and  maintains  what 
may  be  termed  the  most  healthful  and  harmonious  internal  discipline. 
Negative  illustrations  of  this  point  may  perhaps  be  presented  the  most 


300  PRACTICAL    BAXKIXG. 

easily  and  concisely,  since  such  seem  to  come  the  most  frequently 
under  the  direct  notice  of  the  practical  banker. 

A  bank  is  in  a  bad  way — is  running  along  with  a  deal  of  dangerous 
friction — when  it  is  manned  by  a  corps  of  officers  who  do  not  fall  into 
habits  of  mutual  regard  for  and  complaisance  towards  each  other 
wliile  thrown  together  in  the  discharge  of  their  daily  duties. 

The  bank  whose  superior  officers  do  not  do  all  in  their  power  to 
aid  and  instruct  the  officers  under  thcm^ — all  they  can  to  make  them 
contented  and  to  assist  them  in  the  work  of  qualifying  themselves  for 
advanced  positions — is  not  a  bank  with  a  safe  £ind  desirable  adminis- 
tration of  its  internal  affairs. 

The  bank  whose  Directors  and  officers,  from  the  President  down- 
wards, are  prone  to  indulgence  in  stock  speculations,  and  who  seem 
to  be  currently  more  taken  up  with  the  occupation  of  studying  the 
vibrations  and  revolutions  of  the  share  Exchange  than  with  the 
business  of  banking — the  business  wliich  is  nominally  their  sole  pro- 
fession— cannot  be  considered  an  institution  that  is  managed  with  due 
prudence  and  safety.  Defalcations  are  particularly  liable  to  be  the 
outcome  of  such  a  situation. 

The  bank  which  is  managed  without  a  due  regard  for  the  statutes 
of  banking,  and  with  an  open  disregard  of  the  principles  of  strict 
honor  and  honesty,  equity  and  fairness,  is  surely  in  a  bad  way,  and 
also  particularly  open  to  losses  from  the  irregularities  of  employees  who 
have  been  demoraUzed  by  their  surroundings — who  have  lived  under 
the  influence  of  bad  examples. 

So  I  might  go  on  with  my  illustrations.  But  enough  has  been  said 
to  point  my  moral  and  explain  my  drift. 

After  all  care  has  been  taken  and  notwithstanding  good  discipline 
and  management,  sometimes  the  trusted  clerk  is  found  untrustworthy 
and  the  apparently  honorable  man  proves  to  be  a  rascal.  Then  comes 
a  new  lesson. 

Whenever  a  careful  and  well-managed  bank  meets  with  a  loss  from 
the  defalcation  of  some  officer  whom  it  has  employed  in  some  one  of 
its  positions  of  trust  and  responsibility,  ft  at  once  endeavors  to  set  up 
in  the  path  through  which  the  loss  has  entered  the  bank  some  guard 
which  shall  prevent  a  recurrence  of  the  same  sort  of  irregularity.  And 
where  a  bank  has  had  contests  and  losses,  which  have  been  the  outcome 
of  some  imperfect  methods  of  administering  its  affairs,  it  at  once 
attempts  to  institute  improved  methods,  which  shall  forever  prevent 
the  coming  of  similar  difficulties. 

In  this  way  the  whole  system  of  banking,  in  respect  to  its  internal 
administration,  has  been  built  up — has  been  brought  forward  to  its 
seemingly  well-nigh  perfect  condition,  as  far  as  its  methods  and 
machinery  are  concerned. 

But,  with  the  enormous  increase  of  business  which  characterizes  the 
times,  and  the  discovery  of  new  methods  of  fraud,  forgery  and  swindling. 


SOME    WORDS    OX    MANAGEMENT.  301 

of  all  sorts,  new  appliances  for  protection  against  these  latter  will  be 
in  constant  request. 

But  these  guards  and  these  improvements  must  not  be  temporary- 
matters,  to  be  given  up  as  soon  as  the  first  excitement  is  over.  I  will 
cite  a  few  actual  eases. 

The  bank  had  been  defrauded  of  two  hundred  thousand  dollars  by- 
clerks  who  had  covered  their  wicked  tracks  by  a  free  use  of  the  eraser. 
A  committee  of  the  Directors,  who  afterwards  sat  upon  the  question 
of  how  the  bank  should  in  future  be  made  safe,  decided  that  in  future 
no  erasers  should  ever  be  used  in  that  bank.  For  a  while  this  rule 
was  carried  out,  but  to-day  as  many  erasers  ai'e  used  there  as  ever. 

The  bank  had  lost  by  defalcation  of  officers  who  had  been  stock 
speculators.  The  Directors  decided  that  they  would  henceforth  employ 
no  officers  who  speculated  in  stocks.  In  time  this  rule  became  a  dead 
letter,  and  the  officers  of  that  bank  "invested"  theh'  money  about  as 
they  pleased. 

The  bank  had  lost  heavily  by  a  defalcation  of  its  officers,  who  had 
tampered  with  the  pass-books.  The  Directors  decided  that  a  rule 
should  be  set  up  in  that  bank  that  no  balanced  pass-book  should  be 
delivered  to  a  depositor  at  the  end  of  the  month  until  it  had  been 
examined  by  the  President  of  the  bank  and  by  him  compared  with  its 
trial  balance.  To-day  the  pass-books  in  that  bank  are  handed  out  at 
the  end  of  the  month  by  any  of  its  officers. 

The  bank  had  been  half  ruined  by  defaulting  clerks  who  had 
operated  between  regular  exammations — examinations  which  came 
at  stated  times,  and  which  the  sharp  clerks  duly  prepared  for.  The 
Du'ectors  made  a  rule  that  irregular — surprise — examinations  should 
be  a  feature  of  their  system  in  future.  To-day  they  have  no  exam- 
inations of  that  sort  there. 

And  so  I  might  go  on,  giving  many  more  illustrations  of  this  sort, 
drawn  from  my  personal  observation.  But  I  have  given  enough  to 
point  the  moral  which  I  have  in  mind,  which  is,  that  it  would  be  well 
for  our  banks,  in  times  of  internal  peace  and  freedom  from  irregu- 
larities, to  Uve  up  to  some,  at  least,  of  the  rules  estabUshed  for  their 
safety  in  times  when  they  were  being  shaken  up  by  defalcations. 

SUNDAY    WORK. 

No  bank  officer  should  work  on  the  Sabbath  except  when  it  is 
demanded  by  necessity.  There  have  been  times  during  the  Rebellion 
when  some  very  patriotic  and  holy  work  was  done  in  many  a  Northern 
bank  on  Sundays.  In  a  time  of  terrible  National  distress  the  London 
"  Times  "  once  issued  the  only  Sunday  edition  it  ever  printed,  and  that 
famous  Sunday  ' '  Times ''  was  sent  forth  for  the  purpose  of  announcing 
that  the  English  Cabinet  and  the  Directors  of  the  Bank  of  England 
had  had  a  Sunday  meeting  and  that  the  outcome  was  a  suspension  by 
the  Bank  of  England. 

There  are  bank  officers  who  of  their  own  choice,  and  simply  because 


302  PRACTICAL   BAIfKINa. 

they  did  not  know  what  else  to  do  with  themselves,  have  fallen  into 
the  habit  of  going  to  the  bank  and  doing  clerical  work  on  Sundays. 
Some  have  said  that  the  complete  quiet  and  absence  of  all  interruption 
which  they  could  get  when  at  this  Sunday  work  made  it  the  best  day 
in  the  week  in  which  to  bring  up  back  work  or  get  work  ahead  so  that 
they  need  not  be  in  a  hurry  on  Monday.  Viewed  from  any  cori-eet 
stand-point  this  habit  of  working  on  the  Sabbath  is  a  very  objection* 
able  one,  and  if  bank  officers  are  disposed  to  indulge  in  it  the  Directors 
should  forbid  it. 

There  is  plenty  of  evidence  of  the  highest  character  and  authority 
proving  that  it  is  better  physically,  mentally  and  economically,  throw- 
ing entirely  out  of  the  question  all  reference  to  its  moral  and  religious 
aspect,  for  a  man  to  do  all  his  labor  in  six  days  and  rest  on  the  Sabbath. 
NOT    A   MODEL   BANK. 

I  think  a  good  point  may  be  scored  by  closing  this  long  chapter 
with  a  brief  picture  of  a  bank  whose  methods  and  machinery  are  in 
all  points  nearly  as  bad  as  they  can  be.  I  think  it  will  be  both 
amusing  and  instructive  to  good  bankers.  The  bank  in  question  is 
an  old-fashioned  institution,  located  in  a  small  interior  town,  and  is 
in  good  and  regular  standing.  The  men  who  run  it  were  not  born 
bankers,  yet  they  are  honest  men.  Its  books  are  kept  upon  a  sort  of 
homespun  system  from  which  it  would  be  impossible  to  gather  any 
forms  for  reproduction  as  models.  Its  pass-books  ai*e  not  balanced  at 
any  regular  time.  They  get  them  in  when  they  find  it  convenient  to 
do  so — say  on  an  average  of  once  in  three  months.  Trial  balances 
and  general  settlements  of  the  leading  books  of  the  bank  are  not 
considered  important  adjuncts  to  the  payment  of  a  dividend  or  the 
preparation  of  reports.  Certificates  of  deposit  payable  on  demand  are 
issued  against  wliich  their  holders  are  allowed  to  draw  checks  at  their 
pleasure,  returning  the  original  certificates  when  the  money  is  all 
drawn  out — if  they  do  not  forget  to  do  so.  The  letters  which  the 
bank  sends  out  are  not  copied  and  none  which  it  receives  are  filed  or 
preserved.  They  are  all  thrown  into  the  waste  basket.  The  same 
disposition  is  made  of  all  the  tickets  and  other  papers  used  in  the 
current  busine.ss  of  the  bank.  One  might  go  on  indefinitely  describing 
the  ways  of  this  very  unsystematic  institution,  where  everything  in 
methods  is  about  as  it  should  not  be.  The  example  must  be  admitted 
to  prove  that  it  is  possible  for  a  little  bank  m  honest  hands  to  run 
along  for  years  without  great  disaster  and  not  have  any  system  in 
managing  the  details  of  its  business,  but  it  is  a  possibility  which  a 
bank  should  not  experiment  upon. 


ON   PERSONAL    MATTERS.  303 


CHAPTER    XIX. 

ON    PERSONAL    MATTERS. 

Let  us  take  a  glance  at  what  may  be  termed  the  correlations  of  the 
banking  business,  and  see  how  the  various  departments  and  officers  in 
charge  are  related  to  one  another  and  intertwined  and  connected  in 
the  routine  operations  which  relate  to  the  management  of  banking 
details.  In  taking  this  view  of  the  whole  corps  of  officers  and  their 
work  Ave  must  look  at  the  bank  wliich  they  are  running  as  an  entire 
and  complete  machine,  all  the  wheels  in  motion,  the  whole  concern  in 
actual  operation  and  doing  its  accustomed  work  with  regularity  and 
success  and  with  as  little  friction  as  possible.  The  President,  if  there 
is  a  working  officer  of  this  description,  stands  at  the  head  of  affairs, 
presiding  over  the  meetings  of  Directors  at  wliich  all  the  most 
important  questions  relating  to  the  management  of  the  funds  of 
the  bank  are  decided  and  where  the  general  policy  of  its  adminis- 
tration is  discussed  and  settled.  In  the  interims,  between  the  regular 
meetings  of  the  Board,  the  President  is  supposed  to  do  nothing  relative 
to  the  management  of  his  bank  not  in  harmony  with  the  ideas  of  the 
Dh-eetors,  as  far  as  he  has  been  able  to  ascertain  them;  and  he  is  also 
supposed  to  be  in  daily  consultation  with  indJAidual  members  of  the 
Board,  particularly  those  of  the  Finance  Committee,  as  they  from 
time  to  time  drop  m  upon  him. 

The  Vice-President,  if  the  bank  has  one,  is  a  "double"  of  the 
President.  Wlien  the  President  is  absent  he  assumes  liis  full  duties, 
and  when  he  is  present  he  assists  him  in  the  presidential  work. 

The  President  looks  upon  his  Cashier  as  his  chief  executive 
officer,  and  bears  somewhat  the  same  relations  to  him  as  the 
captain  of  the  steamer  does  to  his  first  officer,  or  the  colonel  of  the 
regiment  to  his  lieutenant-colonel.  He  holds  him  responsible  for 
carrying  out  the  orders  executing  the  will  of  the  Board  of  Directors, 
expects  him  to  manage  in  full  the  details  of  the  business  of  the  bank, 
to  be  responsible  for  the  general  administration  of  affairs  by  his 
subordinates,  and  to  be  a  faithful  and  skillful  counsel  and  adviser 
in  all  matters  relative  to  the  affairs  of  the  institution.  The  Directors 
are  supposed  to  give  the  Cashier  all  the  officers  he  needs  for  the 
various  departments  in  his  charge,  and  through  their  President  they 
hold  liim  responsible  for  the  general  faithfulness  of  these  subordinates. 
The  Cashier  is  an  official  through  whom  all  the  business  of  the  bank 
may  be  said  to  pass.     He  stands  at  the  head  of  the  establishment, 


304  PRACTICAL    BANKIXG. 

distributes  the  work,  watches  its  progress,  and  receives  and  sums  up 
the  results.  He  stands,  as  it  were,  at  the  gate  of  the  bank,  welcomes 
all  who  have  legitimate  business  with  the  institution,  receives  its 
correspondence,  scatters  its  contents,  whether  they  are  enquiries  or 
remittances,  among  the  departments  and  officers  to  whom  they  belong, 
and  sees  that  due  credits  are  given,  needed  replies  made,  and  prompt 
acknowledgments  rendered. 

The  Cashier,  or  his  direct  assistants,  checks  off  the  remittances 
which  reach  the  bank  through  the  mails,  receives  from  the  President 
the  paper  which  has  been  discounted  by  the  Board,  and  passes  it  over 
to  the  Discount  Clerk  for  computation  and  credit. 

The  Discount  Clerk,  the  official  whose  sole  duty  in  a  large  bank  is 
that  of  calculating  the  discounts  on  paper  taken  by  the  bank,  and 
filing,  recording  and  attending  to  the  collection  of  the  same,  passes 
the  proceeds  of  all  discounts  to  the  Receiving-Teller  for  credit,  to  the 
Cashier  for  remittance,  or  pays  out  the  net  amounts  directly  through 
the  hands  of  the  Paying-Teller.  As  the  in-town  paper  in  his  files 
matures  he  gives  the  same  to  one  of  the  Tellers  to  collect.  His  out-of- 
town  paper  he  passes  over  to  the  Cashier's  department  a  sufficient 
time  in  advance  of  its  maturity  so  that  it  can  be  sent  forward  for 
collection  at  the  points  where  it  is  payable.  He  compares  his  daily 
records  of  maturing  paper  and  discounts  paid  with  the  figures  on  the 
books  of  the  Paying-Teller  and  the  Receiving-Teller,  which  must  tally 
with  his  transactions. 

The  two  Tellers  compare  their  daily  balances  with  those  of  the 
Book-keeper. 

The  Cashier  gathers  from  the  books  of  the  various  departments  of 
the.  bank  a  comprehensive  abstract  of  all  the  receipts  and  disburse- 
ments, and  makes  up  a  summary  of  figures  which  must  accurately 
show  in  outUne  the  entire  transactions  of  the  day. 

The  Collection  Clerk,  whose  duty  it  is  to  take  in  charge  and  collect 
all  paper  which  comes  into  the  bank  for  collection,  other  than  that 
which  goes  at  once  as  cash  into  the  hands  of  the  Teller,  is  brought 
into  direct  connection  with  the  Messenger,  who  is  a  deputy  of  his,  and 
this  latter  officer  makes  returns  of  work  to  the  collection  department. 

The  Book-keeper  makes  those  detailed  debits,  credits  and  balances 

which  are  the  outcome  of  the  transactions  in  all  the  other  departments, 

and  his  pages  are  both  a  history  and  a  present  statement  of  the  bank's 

cash  affairs. 

STEADILY    COURTEOUS. 

One  of  the  first  duties  of  all  bank  officers  is  to  be  uniformly  and 
unwaveringly  polite — courteous — ^to  every  person  dealing  with  them. 
The  wearing  duties  of  their  positions,  various  sorts  of  physical  and 
mental  disabilities  which  sooner  or  later  come  to  bank  workers,  for 
the  reason  that  their  lives  are  confined  ones,  and  because  of  the  mental 
strain  put  upon  them,  the  difficult  character  of  many  of  the  dealings 


ox    PEKSOXAL    MATTERS.  305 

they  are  constantly  liaving  with  the  outside  pubhc,  and  the  idiosyn- 
crasies and  pecuUarities  of  many  customers,  are,  each  and  all,  causes 
which  render  it  hard  for  these  officers  to  maintain,  at  all  times,  tliis 
pleasant  equanimity  which  1  have  demanded.  But,  the  greater  the 
difficulties,  the  greater  should  be  the  struggle  to  attain  what  I  have 
described  as  being  so  absolutely  necessary,  and  the  greater  the  Iionor 
to  which  the  bank  officer  is  entitled  for  his  successful  carriage  under 
such  trying  circumstances. 

Bank  managers  should  make  it  one  of  their  most  vital  duties  to  see 
that  every  subordinate  in  a  bank  behaves  like  a  gentleman,  in  all  his 
Intercourse  with  its  customers. 

Although  it  may  be  one  of  the  hardest  duties  devolving  upon  the 
clerk  to  maintain  this  uniform  politeness  and  good  nature,  under  the 
annoying  and  vexing  circumstances  with  which  he  is  liable  to  be  so 
often  surrounded,  with  resolution  and  practice  he  may  hve  up  to  the 
standard  I  have  set  up. 

From  his  position  behind  the  bank  counter  he  must  dispense  equal 
politeness,  consideration  and  courtesy  to  all  with  whom  he  deals. 
The  size  of  a  person's  bank  account,  his  degree  of  acquaintance  vdth 
the  methods  and  machinery  of  banking,  his  claims  upon  the  bank 
officer  for  time  and  attention,  his  agreeable  or  disagreeable  ways, 
should  not  have  the  slightest  effect  upon  the  deportment  of  the  bank 
officer  who  is  called  upon  to  give  him  attention.  And,  while  he  is 
giving  him  attention,  it  should  be  the  most  undivided  and  interested. 

Great  care  should  be  taken  to  avoid  airs  of  indifference  or 
superiority,  though  the  matter  under  consideration  may  be  of  the 
most  trifling  importance,  and  the  dealer  presenting  it  the  most 
unreasonable  and  unwelcome  person  to  be  imagined. 

From  the  Messenger,  who  delivers  the  notices  and  presents  the 
drafts,  to  the  Paying-Teller,  who  scatters  all  the  money,  all  the  bank 
clerks  should  understand  that  the  highest  civility  is  a  part  of  the  code 
of  their  bank.  And  upon  the  way  such  a  code  is  hved  up  to  may 
depend  much  of  the  success  of  the  bank. 

Here  are  actual  cases. 

The  bank  had  an  account  with  a  large  bank  in  an  interior  town, 
which  account  was  a  reciprocal  affair,  yet  of  large  value  to  the  city 
bank,  for  the  country  bank  kept  with  it  a  heavy  balance,  and  also  did 
its  interior  collections,  which  Avere  payable  in  its  district,  on  very 
advantageous  terms.  The  account  was  of  long  standing,  and  the 
Cashier  of  the  country  bank  had  made  many  visits  to  his  city  corres- 
pondent and  was  well-knoAvn  there ;  but  his  President  seldom  went  to 
the  city,  and  was  not  known  at  all  at  his  corresponding  bank.  One 
day  this  President  called  at  the  city  bank.  Its  President,  who 
happened  to  be  in  attendance  and  to  receive  him,  did  not  chance  to 
be  in  a  gracious  mood,  and  greeted  the  country  banker,  who  was  a 
strong,  able,  yet  unassuming  man,  in  a  ratlier  blunt  and  indifferent 


306  PRACTICAL    BAXKIXG. 

maimer.  Without  being  actually  rude,  there  was  a  nameless  some- 
thing about  his  address  that  was  exceedingly  ungracious.  The  result 
was  that  the  country  banker  changed  his  city  correspondent.  He  ran 
the  country  bank,  was  one  of  the  largest  owners  of  its  shares,  and  was 
one  of  the  best  men  in  his  State. 

This  is  a  simple  incident.  It  has  its  lessons.  Many  banks,  not 
learning  them  in  advance,  have  lost  accounts  in  the  same  quiet  way. 

The  good-hearted  but  overworked  Cashier  of  an  old  time  city  bank 
used  to  figure  in  this  way:  Enter  country  Cashier — a  modest,  but  an 
able  man — who  was  a  leading  banker  in  his  State.  He  passes  over  his 
carpet-bag  to  the  city  Cashier,  and  says  he  will  call  later  and  fill  up 
with  his  redeemed  bills.  The  city  Cashier  seizes  the  bag  with  a  growl, 
throws  it  across  the  bank  with  a  whack,  and  goes  about  sometliing 
else.  The  country  bank  does  not  withdraw  its  account,  but  only 
because,  in  those  old  State  redemption  days,  it  could  go  nowhere  else. 

I  recollect  that  I  once  heard  an  old  merchant  speaking  of  the 
A'arious  bank  officers  he  had  known  upon  a  certain  street,  and 
describing  the  characteristics  of  each  one  of  them.     Coming  to  Mr. 

,  who  was  at  the  head  of  the  largest  bank  in  the  place  and  had 

been  its  successful  President  for  many  years,  having  worked  his  way 
up  to  that  position  after  serving  in  almost  every  other  capacity  In  the 
bank,  the  merchant  remarked  that  this  President  was  an  able  man, 
but  that  he  owed  much  of  his  success  In  life  to  what  might  be  termed 
his  uniform,  unswerving  courtesy.  And  then  he  related  the  following 
incident  Illustrative  of  the  politeness  and  thoughtf ulness  of  this  officer : 

' '  More  than  forty  years  ago  I  was  an  Inexperienced,  new  boy  in  a 
counting-room  in  this  city  and  knew  nothing  about  the  town,  business 
or  the  banks.  My  employer  handed  me  a  check  to  collect  on  the 
bank  Avhere  he  macle  his  deposits.  I  did  not  know  one  bank  from 
another — In  fact  supposed  a  bank  check  could  be  collected  of  any 
bank,  and  that  It  did  not  make  the  slightest  difference  at  what  bank 
I  presented  that  Individual  check.  So  I  stumbled  Into  the  first  bank 
of  which  my  eye  caught  the  sign.  It  was  not  the  right  one,  and  the 
Teller  savagely  asked  why  I  brought  that  check  to  him,  but  did  not 
give  me  any  clear  explanation  of  what  I  should  do  with  It.  Neither 
did  some  other  Tellers  to  whom  I  wrongly  presented  that  bothering 

check.     But  when  I   came  to  the  bank  where  Mr. was  then 

acting  as  Paying- Teller  I  was  treated  with  a  kindness  and  courtesy 
which  I  shall  always  remember.  He  explained  to  me  that  the  check 
should  be  presented  to  the  bank  upon  which  It  was  drawn,  told  me 
how  to  find  that  bank,  and  did  it  all  In  such  an  attractive,  pleasant 
way  that  I  felt  happy  at  once  and  was  very  gi-ateful  to  him.  And 
now,"  said  the  mercrhant,  ''I  am  going  to  see  that  man.  The  old 
gentleman  Is  111,  I  hear,  and  I  will  amuse  and  Interest  him  by  telling 
him  this  little  story  of  the  days  when  he  was  a  bank  Teller." 

The  politeness  and  courtesy  I  have  named  as  being  demanded  of 


ox   PERSONAL    MATTERS.  o07 

the  good  bank  officer  in  his  dealings  witli  people  outside  his  counter, 
should  also  be  as  strictly  practiced  in  his  intercourse  with  all  his 
fellow  bank  officers  with  whom  his  daily  life  is  spent  behind  the 
counter.  Here  he  should  be  just  as  kind  and  polite  to  his  humblest 
fellow  laborer  as  to  him  who  is  in  the  highest  position.  The  janitor 
should  be  treated  just  as  politely  and  kindly  as  the  Chairman  of  the 
Finance  Committee  or  the  President  of  the  bank. 

Without  doubt  these  suggestions  may  seem  to  many  very  common- 
place— of  a  character  so  trite  as  to  belong  to  a  class  of  things  that  go 
without  saying— yet  the  man  of  business  is  called  upon  to  observe  so 
many  violations  of  the  rules  I  have  laid  down  that  he  wiU  welcome 
the  suggestions  here  made. 

LEISURE    TIME    IN   THE    BANK. 

Bank  officers,  while  at  their  desks  and  counters,  should  give  the 
closest  attention  to  the  duties  of  their  position.  These  duties  may  not 
always  keep  them  closely  occupied,  because  large  and  small  banks, 
very  active  banks,  and  banks  which  are  not  stirring  institutions  are 
obliged  to  have  their  staff  of  officers  of  a  size  adequate  to  get  through 
the  work  in  the  busiest  times.  So  from  necessity  there  are  days  when 
many  of  these  officers  have  very  little  to  do.  But  they  have,  never- 
theless, to  be  at  their  posts  waiting  for  business  that  will  not  come. 

Banking  is  a  very  intermittent  business.  Sometimes  bank  officers 
feel  as  if  they  were  nearly  worked  to  death.  At  other  times  they  find 
they  have  nothing  to  do.  This  is  an  unpleasant  feature  of  their 
business.  As  long  as  they  have  to  be  at  their  desks  they  would  rather 
have  regular  and  steady  work.  As  it  is,  what  shall  they  do  with  their 
leisure  time?  Reading  newspapers  doesn't  look  well  and  does  not  give 
a  business  aspect  to  the  bank,  and,  besides,  they  are  an  injury  to  the 
mind.  This  poi-ing  over  one  daily  paper  after  another,  reading  and 
forgetting  as  soon  as  read  luany  things  which  are  not  worth  reading  at 
all,  is  weakening  to  the  mind.  All  business  men  should  read  the 
newspapers,  but  the  question  is  how  to  read  them — how  much  tune 
to  spend  over  them.  The  late  Wm.  H.  Preseott,  who  was  one  of  the 
busiest  of  scholars,  told  a  friend  that  he  gave  just  ten  minutes  a  day 
to  the  daily  papers.  Mr.  Everett  had  the  same  habit.  A  bank  officer 
would  do  well  to  devote  his  time  in  the  bank  when  he  has  leisure  to 
perfecting  himself  in  his  profession  by  learning  thoroughly  every 
department  of  business  that  is  going  on  about  him.  He  can  also  make 
a  practice  of  studying  into  the  general  science  and  philosophy  of 
banking,  finance  and  political  economy. 

These  quiet  times  may  also  be  used  to  a  proper  extent  for  attending 
to  personal  matters  in  the  way  of  correspondence,  etc.  The  bank  is 
not  the  place  where  a  bank  officer  is  expected  to  transact  his  private 
business  of  a  general  character,  but  he  certainly  may  occupy  otherwise 
unoccupied  moments  in  personal  employment  of  some  kind. 

But  while  employed  in  this  manner,  he  should  expect  that  about 


308  PRACTICAL    BANKING. 

all  he  may  be  doing  will  be  subject  to  all  sorts  of  interruptions  and 
casual  inspections  by  anybody  and  everybody  about  him;  and  it  is 
well  for  him  to  avoid  even  the  appearance  of  a  wish  to  shun  observa- 
tion. I  once  heard  an  experienced  bank  man  say  to  a  boy  who  was 
about  entering  on  bank  work :  ' '  Do  your  best ;  learn  all  about  banking, 
and  do  its  work  when  it  has  any  work  for  you  to  do.  Between  wliiles 
you  may,  without  offense,  write  private  letters  at  your  own  desk ;  but 
don't  try  to  hide  them  from  any  one ;  and  if  the  President  or  Cashier 
comes  along  and  wishes  to  read  what  you  are  writing,  let  them  read  it, 
with  the  hope  that  it  may  do  them  good.  Don't  try  to  put  it  out  of 
sight,  as  if  it  was  a  thing  not  to  be  seen,  or  as  if  you  had  not  the 
utmost  confidence  in  your  superior  officers.  Have  your  owniw-ivate 
stationery,  stamps  included.  It  is  well  to  draw  the  Mne  here.  Don't 
make  private  use  of  even  small  items  of  corporation  property. " 

HANDWRITING. 

The  mechanical  work  of  writing  is,  to  most  people,  an  occupation 
that  is  tedious  and  wearisome.  It  is  for  this  reason  that  the  type- 
writer and  its  most  convenient  complement,  the  stenographer,  have 
been  most  heartily  welcomed  by  those  who  are  in  the  harness  of 
literary  work,  correspondence,  and  other  sorts  of  occupations  requu'ing 
a  large  amount  of  writing;  and  all  young  men  entering  banks  and 
counting-rooms,  who  have  good  heads  and  fingers  for  these  trades,  are 
advised  to  learn  short-hand  and  type-wTiting. 

But  it  is  not  necessary  for  me  to  say  that  while  the  writing  machine 
does  good  work  in  its  place,  there  is  an  immense  amount  of  good 
honest  hand  labor  with  the  pen  whieli  no  machine  can  touch.  For 
this  reason  every  bank  officer  ought  to  be  able  to  write  a  good, 
legible  hand.  And  there  are  few  who  may  not  be  able  to  do  this 
if  they  take  proper  care  and  pains  in  the  matter.  It  is  not  by  any 
means  necessary  that  the  penmanship  of  any  man  should  be  what  is 
termed  elegant-looking  from  the  standpoint  of  the  writing-master,  but 
it  is  necessary  that  it  should  be  unmistakably  legible — easily  and 
readily  readable. 

The  junior  clerk,  in  entering  a  bank,  should  not  be  above  taking 
outside  writing-lessons  of  a  good  teacher  of  penmanship,  after  he  has 
entered  upon  his  banking  duties,  if  he  finds  that  his  hand  is  neither 
satisfactory  to  himself  nor  others.  Good,  practical  help  may  in  this 
way  be  obtained  to  fill  up  the  deficiencies  in  his  school  education. 

Our  common  and  liigh  schools  make  a  great  mistake  in  not  giving 
more  time  and  attention  to  the  instruction  of  their  pupils  in  pen- 
manship. 

Few  boys  who  graduate  successfully  from  our  higli  schools  are 
capable  of  writing  a  good  business  letter — even  if  it  be  so  short  and 
simple  a  one  as  an  application  for  a  situation  in  a  bank. 

But,  perhaps,  even  a  better  way  than  taking  direct  lessons  in 
penmanship  may  be  adopted  by  the  bank  clerk  who  is  weak  in  point 


ON  PERSONAL  MATTERS.  309 

of  handwriting.  Let  him  lh*'nly  determine  that  he  will  practice 
himself  into  a  legible  and  rapid  hand.  And  plenty  of  practice,  with 
the  right  aim,  will  do  much  towards  bringing  him  up  to  his  ideal 
standai'd. 

Here  are  a  few  hints  belonging  to  these  premises.  With  ah  aim  at 
legibility  constantly  prominent,  follow  these  simple  rules,  and  leave 
the  matter  of  style  and  elegance  of  strokes  to  occupy  a  secondary 
position.  Cross  all  the  t's,  and  cross  them  distinctly  and  in  the  right 
place;  dot  all  the  i's,  and  dot  them  most  emphatically  in  the  right 
place.  In  forming  loop  letters,  have  the  loops  well  defined;  and  in 
making  m's,  n's  and  u's,  make  them  so  that  they  may  not  be  taken 
for  each  other. 

In  fact,  the  secret  of  forming  a  legible  hand  lies  in  making  each 
and  every  letter  in  such  good  form  that  no  one  letter  can  be  mistaken 
for  another.  Learn  at  once  to  write  without  the  use  of  rulings. 
Learn  to  space  correctly — to  lay  out  a  letter,  or  any  piece  of  writing, 
in  a  good  style. 

The  faculty  of  writing  rapidly  can  only  be  acquired  by  a  good  deal 
of  practice.  But  beware  of  letting  the  habit  of  writing  rapidly  destroy 
the  power  and  habit  of  writing  legibly. 

As  an  illustration  of  what  I  do  not  consider  good  handwriting,  I 
will  mention  the  modern  "angular"  penmanship,  which  is  coming 
somewhat  into  vogue  in  society  in  this  country  and  is  in  some  cases 
being  carefully  taught  in  schools  under  the  names  of  English  or  Gothic 
style.     It  is  of  an  objectionable  type,  since  it  is  indistinct. 

A  young  lady  from  a  first-class  school  was  handed  a  MS.,  with 
the  request  that  she  prepare  a  fair  copy  of  it  for  the  printer.  The 
transcript  she  returned  looked  neat,  i-egular,  well  spaced  and  free 
from  errors  and  alterations;  but  it  had  one  fatal  defect.  It  was 
impossible  to  read  it  because  it  had  been  written  in  the  Gothic  style. 
The  most  experienced  printer  would  be  sure  to  stumble  and  growl 
over  it.  The  leading  cause  of  its  indistinctness  lay  in  the  fact  that 
there  was  not  the  slightest  perceptible  dilTerence  in  the  construction  of 
the  n's,  m's  and  u's. 

Any  system  of  instruction  in  writing  that  countenances  such  a 
method  as  this  should  be  put  aside. 

Manuscript  where  all  the  t's  are  firmly  crossed,  the  i's  strongly 
dotted,  the  n's  made  distinctly  unlike  the  u's,  and  the  i's  not  like  j's, 
can  be  deciphered  very  easily  by  the  printer,  though  others  might 
condemn  the  hand  as  homely  and  not  stylish  writing. 

I  repeat  that  the  first  point  to  be  considered  in  penmanship  is 
legibility. 

SIGNATURES. 
The  banker  is  called  upon  to  study  many  of  these.     He  is  also, 
particularly  if  a  bank  Cashier,  called  upon  to  make  many  of  them. 
The  first  duty  of  a  person  in  making  a  signature  is  to  make  it  as 


310  PRACTICAIi    BAXKIXG. 

legible  as  he  possibly  can — to  make  it  so  that  it  can  be  easily  and 
quickly  read  by  any  and  every  person  who  is  called  upon  to  make  it 
out. 

But  this,  the  first  and  most  important  principle  in  signature- 
forming,  is  constantly  and  most  emphatically  violated  by  those  who 
ought  to  know  better. 

People  will  write  letters,  fill  up  notes  and  draw  checks  in  a  hand 
that  can  be  read ;  but  the  same  parties  ^vill  often  sign  these  documents, 
apparently,  with  the  deliberate  intention  of  making  it  impossible  for 
any  but  those  most  intimately  acquainted  with  then-  hieroglyphics  to 
decipher  them. 

Some  of  these  manufacturers  of  occult  and  obscure  signatures 
seem  to  take  a  real  satisfaction  and  pride  in  their  productions.  There 
are  instances  where  they  appear  to  be  the  result  of  long  and  close 
study  of  methods  of  making  up  what  they  may  «laim  to  be  a  signature, 
but  what  is  really  after  all  merely  an  arbitrary  arrangement  of  marks 
they  have  invented,  which  have  in  their  results  no  more  resemblance 
to  their  real  written  English  names  than  they  do  to  Hebrew  or  Chinese 
characters. 

Had  I  space  I  should  here  introduce  some  fac  similes  of  typical 
specimens  of  autographs  of  the  character  I  have  described,  quite  a 
number  of  which  are  within  my  iumiediate  reach,  accompanying  the 
"pictures"  with  offers  of  Mberal  rewards  to  any  person  who  would 
decipher  them. 

There  are  bankers,  as  well  as  business  men,  who  have  an  idea  that 
they  can,  by  "getting  up"  an  odd,  obscure  and  starthng  signature, 
render  forgeries  of  their  names  more  difficult  of  accomplishment. 
But  this  is  a  great  error.  These  oddities  are  more  liable  to  forgery, 
more  easy  of  imitation,  than  is  a  good  plain,  square  and  perfectly 
legible  hand.  Such  a  hand  will  be  sure  to  have  deUcate  charac- 
teristics wliich  wUl  be  more  likely  to  prove  safeguards  against 
successful  imitations  than  will  the  odd.  but  broad,  features  belonging 
to  the  class  of  objectionable  signatures  I  have  been  describing. 

Let  every  person  who  knows  how  to  write  show  this  knowledge 
in  his  signature. 

And  let  every  person  who  is  in  any  way  somewhat  unskillful  in  his 
chirography  learn  as  soon  as  possible  how  to  write  his  name,  at  least 
in  a  clear  manner;  for  it  is  a  sign  that  he  is  likely  to  be  often  called 
upon  to  paint. 

Before  closing  this  subject,  let  me  add  a  word  upon  the  general 
philosophy  of  signature-making. 

During  the  years  of  my  banking  experience  I  have  had  considerable 
to  do  with  signature-making  and  signature-reading,  and  I  may  be 
able  to  ofEer  an  idea  or  a  suggestion  of  value  and  interest.  There  is 
one  point,  to  begin  with,  that  has  always  seemed  to  me  curious  and 
suggestive.     Signatures  are,  as  far  as  my  observation  has  extended,  no 


ox    PEKSOXAL    MATTERS.  :511 

sort  of  an  indication  of  the  character  or  characteristics  of  the  writer. 
There  used  to  be  a  theory  about,  and  I  imagine  it  obtains  in  some 
quarters  now,  that  you  could  tell  something  of  what  sort  of  a  man  a 
person  was  by  seeing  and  examining  his  signature.  But  I  got  that 
notion  out  of  my  head,  if  it  was  ever  in  it,  long  ago.  I  have  seen  so 
many  bold,  strong,  John  Hancock-style  of  signatures,  written  by 
rather  mild  men  (to  put  it  mildly),  and  so  many  little,  effeminate, 
shirking  signatures,  written  by  powerful,  indomitable  hands,  that  I 
now  "take  no  stock"  in  the  "signature-revelation"  theory. 

But  all  this  is  not  what  I  was  going  to  say.  I  have  a  report  to 
make,  and  practical  suggestions  to  offer.  In  the  first  place  I  have 
been  bothered  so  much  by  illegible  signatures  that  I  clamor  in  behalf 
of  sufferers  everywhere  for  a  style  of  signatures  that  can  be  easily 
read. 

Every  child  attending  school  should  be  taught  to  write  his  name 
neatly  and  clearly,  without  the  use  of  a  single  fancy  Line  or  flourish, 
and  every  person  should  try  hard  to  keep  up  such  a  way  of  affixing 
himself. 

Some,  who  are  very  good  penmen,  persist  in  doing  some  one  thing 
or  another  to  their  signatures  which  renders  them  a  mystery  and  a 
terror  to  all  brought  in  contact  with  them.  A  word  or  two  in  illustra- 
tion of  this. 

I  have  before  me  signatures  to  checks  of  this  style.  The  name  has 
been  written  fairly  well,  but  the  signer  has  adopted  the  foolish  notion 
that  he  will  be  safer  against  alteration  of  his  check  figures  if  he  puts 
them  in  red  ink  right  over  his  name.  He  does  this,  and  spoils  his 
signature  without  helping  in  the  slightest  degree  to  guard  against 
fraud. 

Another  has  an  embossing  machine,  and  stamps  the  amount  over 
his  name.     Result,  no  good  to  anybody. 

Another  has  the  idea  that  he  must  get  up  something  unique  in  the 
way  of  signature — the  idea  that  safety  against  forgery  lies  in  such 
uniqueness  and  oddity !     All  nonsense. 

A  good,  plain,  legible  signature  takes  the  prize  in  all  directions  on 
all  points. 

Memorandum:  Use  good  ink;  put  on  plenty  of  it;  learn  to  use 
pencil,  quill  or  pen,  and  all  sorts  of  Avritmg  implements  now  in  vogue, 
for  you  may  have  to  apply  them  all ;  learn  to  write  sitting  erect ;  learn 
that  you  must  never  put  your  signature  to  anything  in  a  careless 
manner,  either  as  to  the  style  of  the  writing,  or  as  to  the  purj)ose, 
word  or  intent  of  the  signature.  That  is,  consider  it  an  ironclad,  a 
sacred  thing,  not  to  be  carelessly  given  or  easily  forgotten. 

PEN   PARALYSIS. 
There  has  been,  off  and  on,  no  little  excitement  among  those  whose 
lives  are  very  much  occupied  with  the  pen,   over  the  pen  paralysis 
question.     Without  doubt  there  have  been  very  ipany  instances  where 


312  PRACTICAL    BAXKIXG. 

persons  have  suffered  from  the  effects  of  the  long-continued  use  of 
uietaDic  pens.  Some  have,  for  this  reason,  been  obliged  to  give  up 
writing  entirely. 

My  attention  has  been  called  to  this  subject  by  a  case  which 
recently  came  vxp  at  my  own  counter. 

When  my  caller  came  to  sign  his  name  in  the  place  pointed  out  he 
made  his  signature  with  his  left  hand  with  a  slow  and  laborious  effort, 
although  he  had  in  his  previous  calls  for  the  same  purpose  given  a 
bold,  dasliing  and  rapid  autograph  with  a  firm  right  hand.  The 
helpless,  aimless  swinging  of  his  right  hand  and  arm,  and  the  sinister 
signature,  revealed  at  once  the  fact  that  he  had  met  with  a  partial 
stroke  of  paralysis.  He  was  a  young,  stalwart  and  active  man,  and  I 
could  not  but  show  a  sympathetic  surprise  over  his  condition — a 
surprise  of  an  enquiring  character — which  drew  from  him  the  explana- 
tion that  considerable  writing  with  that  modern  instrument  of  torture, 
the  steel  pen,  had  brought  upon  him  a  stroke  of  pen  paralysis,  or 
what  is  often  termed  scriveners'  palsy  or  writers'  cramp.  He  was  a 
gentleman  of  wealth  and  culture,  and  a  great  traveler.  In  the  con- 
versation we  fell  into  over  this  unfortunate  and  rapidly  increasing 
complaint,  some  very  interesting  Ught  was  thrown  upon  it.  I 
had  long  given  considerable  attention  to  this  crippling  disease,  and 
was  deeply  concerned  in  what  he  had  to  say  about  it.  The  palsy 
comes  suddenly,  often  with  very  slight  warning.  In  the  case  of  one 
bank  Cashier,  it  seized  upon  the  two  forefingers  of  liis  right  hand  at  a 
time  when  he  never  dreamed  of  his  hability  to  such  a  complaint,  and 
at  once  largely  incapacitated  liim  for  an  occupation  which  was 
pretty  much  his  sole  reliance.  The  pen  dropped  at  once  from  his 
helpless  fingers.  The  saddest  thing  about  this  complaint  is,  that  so 
far,  the  highest  authorities  have  written  it  down  as  incurable.  Yet 
few  sufferers  from  it  are  willing  to  give  up  in  this  way.  And  the 
most  of  them  are  nowadays  working  away  under  electric  and  massage 
treatment,  believing  there  is  hope  for  them  in  these  two  fields  of 
practice.  There  is  Uttle  doubt  but  that  help  is  received  by  improving 
the  general  health  and  by  persistent  but  gentle  exercise  of  the  hand 
and  arm  affected.  The  disease  can  in  many  cases  be  warded  off  by 
certain  methods  of  self  management.  Among  these  may  confidently 
be  recommended  to  those  persons  who  are  much  in  slavery  to  the 
pen,  the  use  of  the  quill  or  the  pencil  upon  soft  paper,  and  the 
cultivation  of  an  easy  and  erect  position  in  writing  and  easy  and 
correct  methods  of  holding  the  pen. 

Of  course,  the  quill  pen,  while  readily  used  in  correspondence  and 
general  manuscript  work,  and  in  signing  bills  and  general  signature 
work,  cannot  well  be  used  on  books.  Every  person  who  has  much 
writing  to  do  should,  however,  learn  to  make  a.  quill  pen,  and  learn  to 
use  one. 

But,  after  weighing  all  the  different  theories  and  hearing  a  great 


ox  PEKSOXA.L  MATTERS.  313 

deal  said  on  this  matter  of  pen  paralysis,  I  am  inclined  to  think  that 
much  of  the  trouble  that  comes  to  sedentary  men  in  the  way  of 
disabilities  of  this  character  arises  from  general  ill-health,  want  of 
proper  exercise  in  the  open  air,  and  the  ever-needful  special  exercise 
of  the  hands  and  anus  in  some  kind  of  work,  or  gymnastics,  which  shall 
serve  as  a  counteracting  mtluence  upon  the  efieets  of  the  monotonous 
and  confining  occupations  of  the  desk. 

All  persons  who  are  largely  occupied  in  writing  should  systematically 
and  thoroughly  exercise  the  arms  in  some  natural  and  unstraining 
work.  Cutting  wood,  sawing  wood,  hoeing,  raking  and  similar  arm 
and  hand-using  labors  are  to  be  recommended  under  this  head. 
Walking,  riding  and  driving  are  pleasant  recreative  exercises.  But 
these  do  not  always  call  in  play  the  writing  muscles  of  the  hand  and  arm, 

A   DEATH    IN    THE    BANK. 

There  comes  a  day  when  the  officer,  who  may  have  worked  by  your 
side  for  many  years,  falls  by  the  way.  His  gomgs  and  comings  have 
been  so  regular  and  machine-hke  that  you  hardly  counted  upon  their 
cessation.  But  some  day  he  fails  to  present  himself  at  the  usual  hour, 
at  the  customary  desk,  to  do  the  work  which  has  been  so  long  familiar 
to  him,  and,  in  his  place  there  reaches  the  bank  a  repoi't  that  he  is  not 
"well.  He  sends  word,  perhaps,  that  he  is  not  very  ill ;  that  he  takes  a 
day  or  so  off  for  the  purpose  of  recovering  his  strength,  and  that  he  will 
be  back  at  his  post  soon.  But  many  days  slip  by,  and  lie  does  not  come. 
By  and  by,  there  reaches  the  bank  a  report  that  he  is  not  so  well; 
that,  instead  of  gaining,  he  is  losing,  and  members  of  his  household 
come  to  his  place  of  business,  and  tell  of  their  serious  alarm  about  the 
condition  of  liis  health.  He  has,  perhaps,  sunk  into  a  fever,  or  become 
the  victim  of  prostration  of  some  other  alarming  description.  We  are 
told  that  his  mind  is  wandering.  In  his  delirium  he  talks  and  thinks 
mainly  of  his  work  at  the  bank;  "  runs  on,"  about  counting  money, 
adding  long  columns  and  making  entries.  Before  the  officers  of  the 
bank,  who  are  more  busy  than  usual,  for  they  ai"e  helping  on  his  work, 
have  hardly  time  to  call  upon  him,  or  to  think  much  about  his  case, 
the  news  reaches  them  that  he  is  dead ;  that  his  bank  work  is  done ; 
that  they  shall  see  him  no  more.  As  many  of  them  as  can  go  to  his 
funeral,  carry  flowers  to  rest  upon  his  coffin,  and  follow  him  to  the 
grave.  They  ^'isit  his  family,  if  he  has  left  one,  and  endeavor  to 
comfort  them  by  bringing  up  pleasant  remembrances  of  their  lost 
fellow-officer,  and  try  to  do  little  kindnesses  for  these  surviving  friends 
of  his. 

The  lessons  in  practical  banking  which  should  be  the  outcome  of 
such  occurrences  as  this  to  which  I  am  referring — happenings  which 
come,  alas,  so  very  often — are  of  an  impressive  character. 

In  view  of  the  fact  that  those  with  whom  we  work — in  whose  com- 
panionship oui*  business  hves  are  spent — are  liable  to  be  so  soon  placed 
beyond  the  reach  of  our  good  influences,  our  kind  services,  our  courteous 


314  PRACTICAIi   BANKING. 

words,  and  pleasant  offices,  we  shoiild  make  the  most  earnest  endeavors 
to  do  all  that  we  can,  each  and  every  day,  to  add  to  then*  comfort, 
their  happiness  and  their  general  advancement  and  success  in  life. 

Washington  Irving  somewhere  says,  that  no  thoughtful  man  can  ever 
look  upon  the  face  of  the  dead  without  wondering  that  he  could  ever 
have  cherished  animosity  against  the  living,  who  are  so  soon  to  be  called 
upon  to  rest  in  the  cold  embrace  of  the  grave.  And  no  person  will  ever 
regret  the  patience,  the  forbearance,  and  the  charity  which  he  has 
shown  in  life  towards  those  who  have  by  death  been  placed  beyond  the 
reach  of  his  services  and  his  influence. 

HOMES    OF   BANK    OFFICERS. 

In  England,  it  is  so  much  the  custom  of  the  chief  bank  oflBicers  to 
hve  in  the  same  building  with  the  banks  in  which  they  are  employed, 
that  a  standard  English  work  on  bank  architecture  makes  just  as  much 
a  point  of  providing,  in  its  plans  for  banking  buildings,  for  the  rooms 
in  which  these  officers  are  to  live  as  it  does  for  laying  out  rooms  in 
which  they  are  to  do  their  banking  business. 

There  are,  within  the  precincts  of  the  Bank  of  England,  residences 
for  nine  families,  which  are  all  occupied  by  employees  of  that  bank. 

In  this  country,  in  our  cities  and  large  towns,  neither  the  Managers 
nor  any  of  their  officers  are  often  foiind  making  their  homes  under  the 
same  roofs  with  their  banks. 

Among  the  smaller  banks  in  the  interior  it  is  not  an  infrequent 
custom  for  bank  Cashiers  to  occupy,  as  home  quarters,  a  portion  of 
their  banking  building. 

Or,  to  state  the  case  as  I  have  the  most  often  observed  it,  where  the 
bank  and  the  Cashier  live  together,  the  bank  is  found  occupying  a  single 
comer  room  in  the  house  which  is  the  residence  of  the  Cashier  and  his 
family. 

It  would,  without  doubt,  be  the  better  plan,  other  things  being 
equal,  for  bank  officers  to  live  away  from  their  places  of  business. 

The  American  idea  of  separating  the  man  from  his  shop  is  the  one 
to  be  chosen  in  preference  to  the  old  English  idea  of  keeping  house  and 
store  under  one  roof. 

And,  in  the  case  of  bankers  and  banking,  it  is  particularly  to  be 
desired  that  the  man  and  business  should  have  independent  homes  and 
independent  hours.  The  profession  of  which  we  are  treating  is  apt  to 
be  absorbing  and  narrowing  in  its  influence,  and  the  banker  who  never, 
day  or  night,  gets  out  of  the  range  and  sight  of  his  bank  is  far  more  in 
danger  of  becoming  a  mental  and  physical  slave  to  his  business  than 
he  would  be  if  he  daily  had  a  chance  to  put  some  little  distance 
between  himself  and  his  vaults,  cash  and  books. 

BANK   CLERKS'    INVESTMENTS, 
The  bank  clerk,  while  he  is  a  bank  clerk,  should  be  content  to  live 
on  his  salary — should  avoid  all  attempts  to  extend  it  by  risky  specula- 


ON    PERSONAL    MATTERS.  SIS 

tions.  If  ho  remains  a  bank  officer,  he  may,  if  he  lives  long  enough, 
has  health,  and  practices  economy,  acquire  a  moderate  competence. 

I  have,  in  another  place,  unsparingly  condemned  the  habit  of 
speculating  in  stocks,  as  practiced  by  employees  in  banks.  I  have  no 
hesitation  in  saying  that  the  bank  clerks  of  the  country,  who  have  been 
working  and  speculating,  during  the  last  decade,  would,  to-day,  be 
better  oil  pecuniarily  if,  in  all  this  tim.e,  they  had  given  their  minds, 
during  business  hours,  exclusively  to  their  clerkly  duties,  put  by  in 
first-class  savings  banks  all  the  surplus  of  their  earnings,  without 
giving  themselves  any  trouble  at  all  about  this  matter  of  personal 
investments,  and,  out  of  busmess  hours,  devoted  themselves  to  the 
improvement  of  their  minds,  and  to  the  recreation  and  refreshment  of 
mind  and  body.  Proof  of  the  correctness  of  this  general  verdict  may 
be  deduced  from  careful  observations  in  a  narrowed  field. 

A  bank  officer,  of  the  most  extensive  acquaintance  among  the  men 

of  his  class,  in  one  of  our  largest  cities,  not  long  ago  publicly  stated 

that  he  was  perfectly  confident  that  the  bank  clerks  of  his  city,  who 

had  been  working  along,  contemporary  with  him,  during  the  past  20 

years,  would  be  better  off  than  they  were  to-day  if  they  had  simply 

put  aside,  from  month  to  month,  their  savings,  even  in  non-interest 

producing  safe  places,  instead  of  continually  struggling,  as  had  beea 

their  custom,  to  get  large  interest  for  their  money,  and  to  increase  it 

by  speculation. 

BANK    SECRETS. 

In  these  days  of  regularly  published  returns  of  condition  and 
periodical  examinations  by  Commissioners,  banks  have  little  oppor- 
tunity for  keeping  their  affairs  and  their  situation  hid  from  public 
observation.  In  the  old  days  of  banking  in  this  country  thei*e  was 
different  management  from  this.  There  was  apt  to  be  thrown  an  air 
of  what  may  be  termed  dignified  reticence,  if  not  actual  mystery, 
about  the  banks  and  banking  of  those  periods,  which  was  quite  in 
harmony  with  the  fashions  in  banking  in  the  old  country  from  which 
we  had  brought  most  of  the  models  for  our  naethods  and  machinery. 
There  are  bankers  now  living  who  can  remember  when  customers  of 
the  leading  old  banks  of  New  England  always  had  to  take  off  their 
hats  in  coming  into  the  august  presence  of  their  bank  Managers,  and 
when  these  institutions  were  hedged  about  by  a  reserve  and  formal 
dignity  which  would  astonish  a  modern  bank  depositor  or  paper  broker. 
At  the  period  referred  to  it  was  the  custom  to  administer  to  both 
officers  and  Directors  oaths  of  secrecy  and  faithfulness  which  were 
modeled  on  tliose  in  use  in  London  banks.  I  found  the  banks  of 
London  still  using  the  veiy  forms  of  oaths  of  office  which  wore  once 
in  vogue  here,  but  which  have,  with  us,  quite  gone  out  of  fashion. 
Here  are  copies  of  two  of  these  bank  oaths  (see  Forms  74  and  75)  which 
are  in  use  to-day  in  London  banks,  the  first  being  the  form  for  Directors 
and  Trustees.     While  our  banks  do  not  to-day  exact  such  a  pledge 


316  PRACTICAL    BAXKIXG. 

from   their  officers,    every   honorable    employee  will  feel   bound  to 
preserve  a  proper  reticence  as  to  the  transactions  of  his  mstitution : 


Declaration  of  Secrecy  for  Directors  and  Trustees. 

We,  the  undersigned  persons,  being  respectively  the  Directors  and  Honorary 

Directors  and  Trustees  of  the  public  Joint-Stock  Company,  called , 

do  severally  declare  that  we  will  respectively,  faithfully  and  impartially  discharge 
the  several  duties  devohing  on  us  as  such  Directors  as  aforesaid,  according  to 

the  deed  of  settlement  of  the  Company  bearing  date  tlie  day  of ,  and 

any  laws  and  regulations  that  may  be  made  in  pursuance  thereof.  And  we  do 
hereby  pledge  oui'selves,  and  as  inviolably  as  if  we  had  taken  oui-  oaths  thereto, 
that  we  will  observe  the  strictest  secrecj'  on  the  subject  of  all  transactions  of 
every  description  of  the  Company  v\ith  their  customers  for  the  time  being,  or 
with  any  other  bodies  or  persons  whatsoever,  and  on  the  subject  of  the  accounts 
of  all  bodies  and  individuals  from  time  to  time  having  accounts  with  the  said 
Company. 

Dated  tliis —  day  of ,  18    . 

rorm  74. 

The  second  (see  Form  75)  is  the  form  for  the  officers : 


Declaration  of  Secrecy  by  the  Managers  and  Clerks. 
We,  the   undersigned   persons,    being   respectively   Managers,  Accountants, 

Cashiers,  Tellers  and  Clerks  of  the — Banking  Company,  do  severally 

declare  that  we  will  respectively,  faithfully,  honestly  and  impartially  discharge  the 
several  duties  devolving  on  lis  as  such  Managers,  Accountants,  Cashiers,  Tellers 
and  Clerks  as  aforesaid,  according  to  the  directions  of  the  Directors  of  the 
Company  and  any  laws  and  regulations  that  may  be  made  by  them.  And  we 
do  hereby  severally  pledge  ourselves,  and  as  iuxiolablj'  as  if  we  had  taken  our 
oaths  thereto,  that  we  will  observe  the  strictest  secrecy  on  the  subject  of  all 
transactions  of  every  description  of  the  Company  with  their  customers  for  the 
time  being,  or  with  any  other  bodies  or  persons  whatsoever,  and  on  the  subject 
of  the  state  of  the  accounts  of  all  bodies  and  individuals  from  time  to  time 
having  accounts  with  the  said  Company. 

Dated  this day  of __ ,  18    . 

Form  75. 
STUDIES  AND  INTERESTS. 
I  might  have  added  to  my  last  section  that  our  bank  clerk  should 
bear  in  mind  that,  in  entering  upon  tliis  occupation  or  profession,  he 
has  voluntarily  shut  the  door  upon  any  expectation  of  accumulatmg 
great  wealth  through  it.  But  he  should  take  some  comfort  in  looking 
at  the  sunny  aspects  of  the  business  he  is  following.  He  is  not  subject 
to  the  wearing  excitements,  the  great  reverses  and  general  feverishness 
which  characterize,  in  so  marked  a  manner,  the  career  of  most  modern 
business  men.  His  occupation,  if  he  honors  it,  and  properly  cattends 
to  it,  gives  him,  as  far  as  occupation  has  an  influence  in  such  matters, 
a  pleasant  social  position;  for,  though  it  is  a  lamentable  fact  that 
some  bank  officers  "amount  to  very  little"  outside  of  their  banks, 
there  are  no  good  i*easons  why  Avorkers  of  this  class  may  not  be  very 
miudi  esteemed  as  citizens.  They  have  on  their  hands,  as  a  general 
thing,  a  deal  more  of  leisure  than  the  average  man  of  business,  and 


ON   PERSONAL    MATTERS.  317 

this  leisure,  if  properly  used,  uiay  be  of  incalculable  advantage  to 
tljeui.  By  study  and  reading,  by  the  cultivation  of  such  hobbies  as 
philanthropy,  art,  literature,  music,  and  other  innocent  pursuits  and 
pleasures,  they  can,  if  so  disposed,  make  a  most  profitable  disposal  of 
their  out-of-bank  hours. 

I  have  now  in  mind  many  well-known  and  most  successful  bankers 
"who  are  as  accomplished  outside  of  their  banks  as  in  them — bankers 
who  are  oil  painters,  artists  of  various  sorts,  amateur  mechanics,  wood 
carvers,  botanists,  etc. ,  etc.  And  they  are  all  the  better  bankers  for 
these  reasons.  The  rest  and  recreation  they  get  out  of  their  out-of-bank 
hobbies  sends  them  back  to  bank  work  in  bank  hours  with  minds 
refreshed  and  strengthened. 

We  sometimes  hear  it  urged  that  bankers,  whose  days  are  so  much 
given  to  mental  and  sedentary  work,  ought  not,  in  their  out-of -business 
hours,  to  indulge  in  much  of  any  reading,  or  study,  which  requires 
close  mental  apphcation  and  deep  thought.  Light  reading  is  almost 
always  recommended  as  the  sort  of  reading  which  is  altogether  the  best 
for  them  to  patronize.  But  it  appears  to  me  that  in  this  matter  a 
mistake  is  often  made.  For  some  minds  which  have  been  wholly  taken 
up  during  business  hours  with  the  routine  occupation  of  banking,  there 
may  be,  when  the  regular  labors  of  the  day  are  over,  more  real  refi*esh- 
ment,  more  genuine  relaxation,  in  taking  up  some  quite  hard  study, 
some  line  of  investigation  demanding  deep  and  close  application,  than 
in  the  busmess  of  half  idling  over  novels  and  aimless  miscellaneous 
reading.  Mental  health,  and  mental  strength  and  refreshment,  often 
come  from  the  hard  work. 

Dr.  William  Everett  said,  on  one  occasion,  in  an  address  to  young 
men,  that  when  he  once  found  himself  sinking  into  a  condition  of 
nervous  prostration  and  mental  depression,  he  saved  liimself  and  drove 
away  the  cloud  by  buckhng  down  to  the  hardest  lines  of  investigation 
and  study  that  he  could  turn  to. 

The  dissipatmg,  weakening  effects  of  too  much  newspaper  reading 
cannot  be  too  strongly  pictured.  Poring  over  newspaper  after  news- 
paper, reading  so  many  things  which  are  not  worth  reading,  in  papers 
"which  are  so  like  another,"  and  so  many  accounts  of  things  that 
are  not  so  and  which  are  to  be  contradicted  in  the  next  issue,  is  neither 
profitable  nor  refi-eshing  to  the  wearied  mind. 

A  distinguished  man  said  in  my  hearing  not  long  ago  that  he  really 
believed  an  inordhiate  fondness  for  reading  was  a  habit  to  be  feared  in 
any  well-regulated  family.  This  radical  remark  was  suggested  by  his 
observations  of  the  time  wasted  by  his  sons  and  daughters  in  novel  and 
newspaper  reading. 

I  am  able  to  give  a  direct  illustration  "from  the  life,"  on  this  point 
of  reading  and  study  in  leisure  hours. 

Happenmg  to  observe  that  a  very  good  young  bank  officer  seemed 
at  a  loss  what  to  do  with  some  of  his  tired  leisure,  I  suggested  to  him, 


318  PRACTICAIi    BAXKIXG. 

knowing  something  of  liis  former  school  tastes  and  talents,  that  he 
revive  and  pursue  the  study  of  French  and  botany — two  studies  in 
which  he  had,  before  the  bank  swallowed  him,  taken  a  deal  of  interest. 
And  it  is  a  pleasant  feature  of  these  two  pursuits  that  they  lead  to  an 
in-door  and  out-door  life,  Avliieh  work  well  together. 

And  I  must  note  here  that  I  happen  to  know  a  very  successful 
banker,  who  is  also  a  most  accomplished  and  enthusiastic  botanist. 
But,  to  the  suggestion  in  question.  The  young  man  adopted  my 
recommendation;  and,  as  I  notice  the  profit  and  pleasure  with  which 
he  follows  up  my  plan,  I  can  but  use  him  and  his  work  as  a  text  for  a 
homily  for  others. 

As  for  the  matter  of  the  French,  what  a  pity  it  is  that  our  bank 
clerks,  many  of  whom  have  been  well  grounded  in  it  at  school,  do  not, 
in  their  clerk  life,  keep  it  up — take  it  up  and  carry  it  along  so  far  that 
they  shall  be  able  to  readily  read  and  speak  the  language.  They  will 
be  likely  to  find  such  an  accomplishment  of  great  value  to  them, 
French  is  the  Avorld's  language  of  finance. 

In  buying  of  a  Boston  banker  a  letter  of  credit  for  a  httle  European 
travel  I  was  about  taking,  I  found  that  it  was  entirely  written  in 
French;  and  thus  our  American  bankers  generally  draw  them  on 
London. 

It  is  a  very  pleasant  and  convenient  thing  for  a  bank  officer  to  be 
able  to  read  a  French  bill  if  it  comes  into  his  hands  for  collection. 
And,  if  he  ever  goes  to  France,  he  wiU  feel  very  much  as  a  deaf  and 
dumb  man  is  supposed  to  feel  if,  when  there,  he  can  not  talk  French. 

I  must  not  forget  to  suggest  that  bank  officers  must  beware  of 
letting  their  outside  hobbies  interfere  with  their  regular  business; 
and,  as  far  as  what  may  be  termed  sedentary  hobbies  are  concerned, 
they  must  be  taken  on  with  a  good  admixture  of  out-door  exercise. 

As  a  brief  summary  of  the  foregoing  I  will  say,  that  the  best  advice 
I  can  give  to  bank  clerks  is  to  practice  economy,  give  the  strictest 
attention  to  the  work  of  their  profession,  read  and  study,  cultivate 
simple,  inexpensive  habits  and  tastes,  and  get  all  the  legitimate  comfort 
they  can  out  of  their  work,  and  out  of  the  hours  outside  of  work  as 
they  go  along. 

And  while  following  and  enjoying  this  line  of  life  the  ambitious 
clerk  will  also  bo  holding  himself  in  readiness — steadily  fitting  himself 
as  far  as  possible — for  anything  better  that  may  turn  up. 

Without  the  possession  of  a  proper  and  manly  ambition  a  man  is 
good  for  very  little  anywhere. 

From  the  ranks  of  bank  officers  men  have  I'isen  to  very  high  positions 
in  the  general  business  and  financial  world.  There  are  plenty  of  con- 
spicuous illustrations  of  this  point  aU  about  us,  and  there  will  be  many 
more  in  the  future. 


BUSINESS    AND    PLEASURE.  319 


CHAPTER    XX. 

BUSINESS    AND    PLEASURE. 

Professor  Huxley  said,  some  time  ago,  that  he  had  been  reading 
Besant's  novel,  "All  Sorts  and  Conditions  of  Men,"  and  that  he  had 
found  it  on  e  of  the  most  entertaining  books  he  had  ever  read.  What- 
ever may  be  liis  or  others'  opinion  of  this  story,  there  is  in  it  one 
character  most  strikingly  interesting  to  any  one  who  has  for  a  moment 
considered  what  is  to  be  deemed  the  most  unattractive  tendency  of 
service  in  subordinate  positions  in  banks,  other  corporations,  Govern- 
ment departments,  and  the  like.  This  is  the  tendency  towards 
stagnation — mental  and  even  physical — a  drift,  not  in  the  direction  of 
huprovement,  growth,  enlargement,  but  towards  contraction,  shrink- 
age and  decUne. 

In  the  character  in  the  novel  in  question — that  of  Brother  Josephus — 
we  have  a  man  who,  from  a  very  long  occupancy  of  an  humble, 
subordinate  position,  where  his  labor  was  of  the  most  simple  routine 
character,  demanding  of  him  little  exertion,  either  mental  or  physical 
— the  same  thing  over  and  over  again  every  day — done  without  the 
exercise  of  a  particle  of  hope  or  ambition  for  better  things,  finally 
sinks  into  a  condition  well-nigh  bordering  upon  imbeciUty;  and  when, 
at  last,  by  accident,  better  things  are  offered  him — a  higher  situation 
thrown  open  to  him — he  finds  himself  utterly  unfit  for  the  work — 
entirely  unable  to  cope  with  the  duties  of  the  new  position. 

It  does  not  demand  any  very  wide  experience  with  banks  and 
banking  to  enable  one  to  recall  many  instances  of  clerk  life  and 
manners  which  painfully  remind  one  of  the  story  of  Brother  Josephus. 

There  are  many  officers  in  banks  to-day,  good  and  faithful  men, 
who  have  not  advanced  an  inch  since  they  first  entered  there  long 
years  ago,  and  who  have,  in  all  the  time  of  their  service,  evinced  no 
particular  ambition  to  qualify  themselves  for  higher  and  better  things 
by  studying  into  any  matters  even  a  small  degree  without  the  line  of 
then*  special  and  subordinate  duties.  And  when  there  has  sometimes 
come  to  such  rusty  and  stagnant  workers  opportunities  for  promotion, 
they  have  shrunk  back  and  declined  the  advancement,  feeling  no  sort 
of  confidence  in  their  ability  to  fill  the  better  places.  I  have  known 
instances  where  such  men  have  made  feeble  attempts  to  take  on  a 
higher  range  of  work,  and  then  given  up  the  trial  and  returned  to  their 
old  positions. 

The  illustrations— the  instances — of  rust  in  banking  which  I  have 


320  PRACTicAii  ba:skixg. 

g^iven  are,  of  course,  extreme  cases ;  but  the  rust  exists,  and  tliese  cases 

serve  well  to  point  my  moral.     Now,  what  are  some  of  the  causes  of 

this  rust  in  clerks  ? 

RUST    IN    CLERKS. 

In  the  discussion  of  this  point,  I  now  confine  myself,  as  is  natural 
in  this  place,  to  the  consideration  of  bank  work.  But  every  one  must 
fully  understand  that  work  of  many  other  kinds  has  the  same  rusting 
effect  as  that  of  clerking  in  banking  institutions.  Department  clerks, 
and  those  in  general  business  service,  are  often  found  falling  into 
sluggish  routine  ways  of  life  and  action.  The  daily  performance  of 
the  same,  or  nearly  the  same,  class  of  duties,  month  in  and  month  out, 
year  after  year,  must,  in  the  first  place,  almost  inevitably  tend  to  this 
result.  The  work  may  be  confining,  wearisome — wearing,  from  its  very 
monotony ;  yet,  in  time,  it  becomes  a  comparatively  easy  and  machine- 
like task,  requiring  for  its  passable  performance  very  little  mental 
exertion.  Mind  is,  in  many  points,  very  like  muscle.  Disuse  of  either 
is  weakening  in  its  results.  As  the  bank  officer  may,  after  long  exper- 
ience, plod  through  his  daily  routine  of  work  without  much  real 
exertion  of  the  mind,  because  he  has  such  long  experience,  it  follows, 
of  course,  that  his  mind  in  time  loses  somewhat  of  its  \agor,  force  and 
elasticity.  Real,  forcible,  and  most  vigorous  exercise  is  as  necessary  to 
the  best  health  and  development  of  the  mind  as  it  is  to  that  of  the  body. 

Another  phase  of  the  deterioration  in  question  is  shown  in  the  fact 
that  bank  oflBcers,  long  in  one  subordinate  position  of  the  character  I 
have  described,  become,  in  time,  quite  in  the  habit  of  doing  even  their 
familiar  routine  work  less  skillfully  and  effectively  than  those  with  no 
better  natural  capacity  who  are  fresh  workers  in  such  places. 

Another  source  of  the  difficulty  we  are  describing  is  found  in  the 
fact  that  long  and  constant  subordination  to  the  will,  judgment  and 
discretion  of  others  is  almost  sure  to  have  a  narrowing,  weakening, 
and  contracting  effect  upon  the  mind.  From  the  very  nature  of  their 
positions  the  Bank  Teller,  Book-keeper,  etc.,  are  seldom  called  upon  to 
settle  iinything  in  the  way  of  general  business  matters  except  their 
figures  and  their  cash.  They  are  greatly  in  danger  of  becoming  machine- 
like  in  their  ways  and  methods.  The  tendency  I  have  here  described 
is  a  very  unfortunate  one — is  one  of  the  shady  features  of  the  business 
we  are  considering.  But  it  is  a  tendency  that  can  be  very  largely 
counteracted — hedged  against — by  the  proper  management  of  the 
individual. 

The  monotony  of  the  banking  business,  or  of  the  work  and  business 
of  any  other  occupation  or  profession,  becomes  painfully  biu'deiisome, 
and  is  greatly  deepened,  by  the  habit  of  allowing  the  mind  to  sink  into 
what  might  be  termed  a  monotonous  view  of  one's  environments  and 
daily  duties.  By  sturdy  resolution  and  a  cultivation  of  a  habit  of 
mental  self-management,  much  may  be  done  to  hedge  against  and 
ward  off  those  unhealthy  and  most  depressing  habits  of  thought  which 


BUSINESS    AND    PLEASURE.  321 

characterize  many  sedentary  workei-s  in  such  routine  positions  as  those 
held  by  bank  officers  and  many  otlier  classes  of  office  and  shop 
laborers.  Let  such  dull  and  desponding  ones,  who  are  complaining 
that  their  existence  presents  no  variety  of  scene  and  work,  and  tiiat 
their  days  are  but  a  series  of  monotonous  periods  of  labor,  bear  m 
mind  that  in  tliis  life  no  two  days  can  by  any  possibility  be  precisely 
alike.  Instead  of  giving  way  to  a  kind  of  discontented-pendulum 
feelmg  about  the  future  of  their  day's  work,  let  them  take  the  view 
that  only  one  day  at  a  time  is  to  be  taken  care  of — to  be  properly 
lived — and  that  each  single  day  is  best  viewed  when  it  is  looked  upon 
as  a  completed  existence  in  itself,  and  as  a  sort  of  well-rounded  cu'cle 
of  life  and  labors  very  like  the  entire  life  span  of  man.  There  is  a 
remarkable  smiihtude  between  the  single  day  and  the  completed  life. 
The  morning  is  like  the  birth  of  the  individual ;  the  high  hour  of  the 
day,  with  its  activities,  like  the  prime  of  life ;  the  decline  of  the  day 
like  old  age ;  then  comes  sleep,  wliich  is  a  brother  to  death. 

It  is  quite  hkely  that  this  desponding  view  of  their  business  hfe 
succeeds  an  energetic  and  wholly  different  period.  Some  managers 
and  clerks  who  have  served  long  and  faitliiully  in  the  routine  paths  of 
banking,  by  their  industry  and  skill  placing  the  business  under  their 
charge  in  such  perfect  and  systematic  running  order  that  it  has  finally 
attained  a  machine-like  perfection  of  movement,  when  that  point  has 
been  reached  fall  into  an  indifference  and  loss  of  vital  interest  in  their 
professional  work.  Assured  of  their  position  and  the  fair  success  of 
the  institution,  they  grow  inclined  to  let  what  they  deem  well-enough 
alone,  and  become  anti-progressive,  old-fashioned  and  unenterprising. 
A  hint  in  time  of  the  dangers  lurking  in  their  ways  of  life  and  work 
may  be  of  no  little  value.  They  should  be  given  to  understand  that 
they  cannot  stand  still  in  this  life  either  in  business  or  in  social  spheres 
of  action  and  must  keep  fully  abreast  of  the  times  or  be  in  critical 
danger  of  falling  behind  in  the  lively  race  in  which  they  are  pretending 
to  take  a  part.  Every  one  of  their  business  days  should  be  characterized 
by  alertness  in  seeking  out  new  methods  and  applying  improved 
machinery  in  the  administration  of  their  business.  They  should  con- 
tinue to  be,  as  business  men,  active  and  practical  students  in  their 
special  departments  of  financing. 

And  yet,  admitting  that  the  bulk  of  the  daily  routine  labors  of  the 
banker,  when  viewed  from  a  pessimistic  stand-point,  must  seem  to  be 
of  an  absolutely  drudge-like  character,  even  labor  that  is  uninviting 
in  its  sameness  may  have  its  value  from  its  regularity  and  necessity. 
And  this  remark  may  with  truth  be  applied  to  the  gi'eater  part  of  the 
labor  which  devolves  upon  any  professional  man.  The  lawyer  and  the 
platform  or  pulpit  orator  have  brief  hours  of  enjoyment  of  the  more 
brilliant  and  cdnspicuous  work  of  their  callings,  but  the  major  part  of 
their  lives  and  strength  must  be  spent  in  monotonous  and  severe  toil 
in  the  study,  the  office,  in  the  committee-room  and  at  the  desk.     Yet 


322  PRACTICAL    BAXKINQ. 

the  matter  in  view  has  a  wiser  and  liealthier  aspect  when  looked  at  in 
a  truly  philosophical  manner.  Regular  and  absorbing  daily  occupation 
of  mind  and  body  under  proper  conditions  and  circumstances  is  an 
unspeakable  blessing  to  man.  The  worker  in  a  bank,  either  as  an 
humble  subordinate  or  chief  Manager,  ought  to  be  thaiikful  that  it  is 
his  lot  to  be  daily  summoned  to  his  office  and  desk  for  the  purpose  of 
fulfilling  his  share  of  the  task  of  work,  w'hieh  is  the  natural  inheritance 
of  the  race.  The  call  to  duty  drags  him  out  of  himself — out  of  that 
natural  tendency  of  the  human  mind  to  sink  into  .stagnation  and  morbid 
conditions  of  self-consciousness;  and,  as  like  an  mtelhgent  machine  he 
goes  through  the  seemingly  dull  round  of  his  daily  duties  he  really  fills 
a  natural  sphere  of  action  and  helps  himself  when  he  feels  he  is  but 
laboring  for  others — for  a  subsistence,  it  may  be,  for  those  dependent 
upon  him.  Such  is  the  constitution  of  our  minds  and  bodies  that  it  is 
argued  with  force  by  the  wisest  thinkers  that  the  human  race  would 
sink  mto  such  a  morbid  state  of  self-consciousness,  if  it  were  not  for 
their  absoi-ption  by  what  are  termed  the  petty  labors  and  cares  of  life, 
that  melanchoha,  insanity  and  suicide  would  be  the  result.  A  wise 
banker  has  said :  ' '  The  every-day  cares  and  duties,  which  men  call 
drudgery,  are  the  weights  and  counterpoises  of  the  clock  of  time,  gi^•ing 
its  pendulum  a  true  vibration  and  its  hands  a  regular  motion. "  In  Aiew 
of  these  facts,  bank  workers  should  study  to  acquire  the  habit  of  taking 
the  most  cheerful  view  of  what  are  termed  the  shady  aspects  of  their 
work — the  cares,  responsibilities  and  confinement  incident  to  their 
pi'ofession. 

Not  long  ago  a  bank  officer  who  was  ill.  not  from  any  organic 
disease,  but  from  a  mysterious  nervous  prostration,  accompanied  by 
great  depression  of  spirits,  and  who  had  been  morbidly  secluding  him- 
self at  home  under  the  care  of  two  young  doctors,  who  had  seen  him 
daily  sinking  lower  and  lower  in  vitality  and  courage,  was  told  by  one 
of  our  most  eminont  physicians,  who  had  made  cases  like  his  a  spec- 
ialty, to  plunge  out  of  his  house — out  of  himself — and  go  regularly  to 
business  even  if  he  had  to  drag  himself  there  by  holding  on  to  the  iron 
I)ickets  of  tlie  street  fences.  The  man  went  to  work,  and,  owing  to  the 
companionship  and  absorption  incident  thereto,  became  a  strong  and 
healthy  person. 

In  view  of  what  I  have  just  said  relative  to  the  advantages  accruing 
to  both  mind  and  body  from  the  pursuit  of  some  regular,  and,  as  it 
were,  bread-winning  daily  occupation,  the  reader  will  readily  conclude 
that  I  am  not  in  favor  of  an  early  abandonment  of  business,  either 
bankmg  or  mercantile,  by  men  who  have  been  wedded  to  the  habit  of 
daily  Avork,  and  who  are  not  mentally  or  physically  incapacitated  from 
its  further  pursuit. 

I  have  observed  that  those  bankers  and  merchants  who  have 
thrown  olT  the  harness  under  the  circumstances  I  have  just  described 
have,  in  a  majority  of  cases,  regretted  the  change  they  made,  and,  in 


BUSINESS    AND    PLEASURE.  323 

very  many  instances,  rapidly  grown  old,  feeble,  listless  and  stagnant, 
Avliile  their  contemporaries,  who  have  perhaps  been  forced  by  the 
pinches  of  poverty  to  keep  at  the  helm  of  trade  and  finance,  have  kept 
themselves  mentally  and  bodily  as  bright  and  active  as  crickets. 

I  have  known  of  cases  where  men  in  banks  who  have  worked 
themselves  up  by  long  and  successful  service  to  high  and  lucrative 
positions,  and  finally  resigned  to  gratify  a  dream  of  idleness,  have  at 
last  gladly  availed  themselves  of  opportunities  to  go  to  work  again, 
even  in  subordinate  positions,  mainly  for  the  sake  of  having  some- 
thing to  do  for  a  portion  of  the  day. 

I  have  also  in  mind  at  this  moment  the  case  of  a  most  successful 
financier,  who  gave  up  business  in  the  prime  of  life  for  the  sake  of 
enjoying  in  leisure  and  travel  the  large  wealth  he  had  accumulated. 
After  three  years  of  "still  life"  he  plunged  again  heartily  into  the 
thickest  of  the  fight,  saying  to  me,  ' '  I  have  found  that  I  could  not 
enjoy  reading  Shakspeare  all  the  time." 

We  recur  to  our  point  of  guarding  against  "rust  "  and  repeat  that 
every  bank  officer  should  study  how  best  to  keep  himself  aUve. 
Promotion,  or  the  hope  of  promotion,  cannot  be  an  infiuence  in  this 
matter  with  all,  for  many  of  the  best  bank  officers  may  be  doomed  to 
labor  on  in  the  same  line  of  work  through  long  years.  But  promotion 
is  not  everything.  Every  bank  officer  should  make  the  best  and  the 
most  of  the  place  in  wliich  his  lines  are  cast,  beheving  that,  in  some 
points,  it  has  advantages  over  the  higher  place  he  may  be  thinking 
about.  He  should  not  fail  of  doing  everything  that  comes  in  his  line 
of  duties  in  the  very  best  manner  possible. 

William  Gray,  the  famous  merchant,  the  first  President  of  the  State 
Bank,  of  Boston,  was  once  accused  of  having  been  a  drummer  when  a 
young  man.     His  only  reply  was,  "Did  I  not  drum  Avell  ?" 

No  matter  how  humble  the  work  of  your  particular  office  may  seem 
to  be,  do  it  in  the  best  manner.  And,  at  the  same  time,  endeavor  to 
learn  all  there  is  to  be  learned  about  the  banking  profession.  Gret  the 
widest  and  broadest  knowledge  of  the  whole  business.  And,  if 
promotion  does  not  happen  to  come,  you  will  win  the  respect  of 
others,  your  own  self-respect,  and  keep  at  a  distance  the  blight  of  rust 
and  stagnation. 

Much  help  in  the  way  of  avoiding  a  tendency  to  experiencing  the 
insidious  effects  of  routine  work  and  business  life  may  be  obtained  by  a 
profitable  use  of  all  out-of-bank  hours  in  employments  that  shall  both 
strengthen  the  mind  and  body — in  studymg  and  out-of-door  exercise. 

A  great  secret  of  true  living  is  to  have  many  interests — to  let  the 
daily  way  of  life  touch,  as  it  were,  upon  as  large  a  variety  of  conditions 
and  situations  as  is  practicable  and  consistent  with  a  proper  discharge 
of  the  indiWdual  duties  and  responsibilities  of  the  particular  occupation 
wliieh  is  supposed  to  be  the  leading  business  of  every  person. 

The  profession  of  banking  naturally  tends  towards  the  complete 


324  PRACTICAL    BAXKIXG. 

absorption  iu  it  of  the  person  who  follows  if.  But  this  entire  absorption 
is  both  unsatisfying  and  unprofitable.  That  bank  officer  is  the  best 
and  most  successful  worker  in  banking,  other  things  being  equal,  who 
is  tlio  most  of  a  man  outside  of  this  narrowing  business  of  ciphering 
and  counting,  recox'ding  and  computing,  and  managing  and  financiering. 
If  he  has  the  happy  faculty  of  completely  casting  behind  hhn,  when  he 
shuts  his  cash  books  and  his  vaults,  his  shop-thoughts  and  shop-ways, 
and  of  plunging  freshly  into  matters  and  things  which  are  of  the  right 
sort,  yet  of  precisely  the  opposite  character  to  those  which  have 
absorbed  and  enslaved  him  during  his  morning  hours  of  business,  he 
will  be  the  more  successful  as  a  business  worker  for  such  a  habit — will 
come  back  to  his  desk  twice  the  man  for  the  refreshment  he  has 
obtained  in  the  way  we  have  indicated. 

Resolution  to  live  and  move  in  this  way  will  help  a  man  immensely 
in  his  work  of  self-government  in  the  premises. 

Let  the  banker  determine  that  he  will  be  something  more  than  a 
bank  machine.  Let  him,  when  out  of  the  harness  of  the  tread-mill, 
cease  to  keep  up  the  tread-mill  gait,  and,  plunging,  as  one  plunges  into 
a  bath,  into  an  atmosphere  as  unbusiness-like  as  possible,  restore  to 
acti\nty  those  mental  and  physical  powei-s  wliich  are  never  called  into 
action  in  his  routine  occupations  and  which  as  a  consequence,  would 
otherwise  become  rusty  and  stagnant. 

HABITS    OF    STUDY. 

People  who  are  not  willing  to  listen,  to  ask  questions,  to  enquire 
into  things,  to  learn  of  anybody  who  has  some  sort  of  valuable  knowl- 
edge which  they  do  not  have,  will  not  become  the  most  intelligent 
people  in  the  w^orld.  The  fact  is,  no  one  man  can  know  everything. 
There  is  no  man  so  humble  and  so  unlearned  that  he  cannot,  if  an 
opportunity  is  given  him,  teach  a  person  some  valuable  thing  which  it 
would  be  difficult  for  him  to  learn  elsewhere. 

Sir  Walter  Scott  built  up  those  magnificent  novels  of  his  very 
largely  out  of  material  he  had  gathered  from  conversations  with  the  old 
men  and  women  of  the  Scotch  peasant  class,  among  whom  he  had  so 
long  walked  and  talked. 

William  H.  Seward's  biographer  tells  us,  that  Mr.  Seward  always 
held  that  he  could  learn  something  valuable  from  every  man  he  was 
thrown  in  contact  with.  And  Mr.  Seward  knew  well  how  to  do  this. 
He  had,  to  a  wonderful  degree,  the  art  of  putting  himself  into  easy 
and  companionable  relations  with  all  classes. 

But  next  best,  says  some  one,  to  the  study  of  men,  is  the  study  of 
books.  And  the  most  valuable  books  for  any  young  man's  study-table 
are  not  books  of  a  genei-al — a  miscellaneous— character,  but  reference 
books. 

Every  young  man  who  is  anxious  to  become  usefully  intelligent — 
really  well-educated — should  resolve  himself  into  an  animated  interro- 
gation   point.     Whenever    in    his    casual    readuigs    of    newspapers, 


BUSINESS    AXD    PLEASURE.  325 

magazines  and  general  literature,  he  meets  with  allusions  and  refer- 
ences which  he  does  not  fully  understand,  or  whenever,  in  mingling 
with  men,  he  has  questions  suggested  to  his  mind  which  he  cannot 
answer,  he  should  not  give  himself  rest  in  the  premises  till  he  has 
solved  the  points  over  wliicli  he  has  stumbled.  As  an  aid  in  this 
work  of  investigation,  a  good  reference  library  is  invaluable.  Our 
imaginary  enquirer  should  surround  himself  with  just  as  many  well- 
selected  reference  books  as  he  can  afEo^d  to  buy — reference  books  of 
the  ciiaracter  of  encyclopedias,  dictionaries,  volumes  of  maps,  manuals 
of  geography,  history  and  biography. 

Persons  hving  in  large  cities,  where  great  libraries  abound,  may  not 
be  in  such  need  of  reference  books  of  their  own  as  are  those  who  live 
away  from  the  centres  of  intelligence  and  population.  Still,  it  is  a 
great  comfort  for  the  student,  in  city  or  country,  to  have  such  books 
as  I  have  described  right  at  his  elbow — to  own  them  himself. 

I  have  thought,  while  cogitating  over  the  points  advanced  in  this 
paragraph,  that  I  should  like  to  be  near,  and  have  the  full  service  of. 
the  novel  office  described  in  the  following  curious  advertisement  from 
a  late  London  "  Times  " : 

THE  UNIVERSAL  KNOWLEDGE  AND  INFORMATION  OFFICE,  REGIS- 
istered,  19  Southampton-street,  Bloomsbury-square,  W.  C.  Every  single  question 
on  any  subject  and  in  any  language  is  charged  Is.  The  charge  for  an  inquiry  which 
is  not  a  simple  question,  but  which  involves  many  questions,  or  wliich  may  require 
mucli  labor  and  time,  can  be  ascertained  Ijcforehand  or  left  to  the  Management. 
Prospectuses  on  application  to  H.  Fisher,  Esq. 

BANKERS'    INSTITUTES, 
or  bankers'  and  bank  officers'  mutual  improvement  societies,  ought  to 
be  set  up  in  every  city  or  large  town  having  a  sufficient  number  of 
persons  interested  in  banking  and  general  financial  matters  to  man 
such  an  institution. 

Every  young  man  who  enters  as  a  worker  in  a  bank  needs  an 
opportunity  to  learn,  as  soon  as  he  possibly  can,  all  there  is  to  be  learned 
about  the  business  he  is  to  follow  as  a  profession. 

A  great  advantage  for  such  a  student  is  the  possession  by  his  bank 
of  a  well -selected  banker's  library — a  good  stock  of  standard  books 
upon  the  subject  of  banking  and  general  finance.  And  every  bank 
should  also  subscribe  liberally  for  the  best  banking  periodicals;  they 
are  sure  to  contain  much  matter  of  fresh  and  living  interest  to  the 
inquiring  bank  officer;  and  they  should  not  only  be  taken  in — they 
should  be  carefully  studied.  But,  in  the  matter  of  libraries  for  the 
banker,  there  is  aia  arrangement  which  I  noticed  in  London,  Liverpool, 
New  Castle,  Birmingham,  etc. ,  which  cannot  but  commend  itself  fully 
to  all  city  bankers  and  business  men  this  side  of  the  water.  There  have 
been  established  in  the  heart  of  these  great  Enghsh  towns  magnificent 
public  reference  libraries — libraries  supplied  in  a  most  exhaustive 
manner  with  every  class  of  reference  books  likely  to  be  consulted  by 
business  men,  and  under  the  superintendence  of  librarians  who  are  in 


326  PRACTICAL    BAXKIXG. 

themselves  "walking  libraries,  and  who  are  ready  to  be  questioned  at  all 
times.  Live  bank  officers  are  continually  striking  points  where  further 
light  is  wanted  to  satisfy  them  ;  and  were  one  of  these  splendidly 
equipped  reference  libraries  right  at  hand,  they  would  often  work  them. 

Another  excellent  aid  for  the  progressive  and  studious  junior,  is  an 
opportunity  of  becoming  a  member  of  an  organization  such  as  I  have 
named  in  my  title  to  this  section — an  organization  whose  objects  sliould 
be  the  holdmg  of  stated  meetings  for  the  most  practical  discussions  of 
the  theory  and  practice  of  banking,  and  for  the  purpose  of  considering 
and  maturing  plans  for  the  general  advancement  of  the  interest  of  the 
banking  guild. 

The  secondary  advantages  of  societies  of  the  type  suggested  would 
be  of  a  very  attractive  character;  and  among  the  most  prominent  of 
these  would  be  the  social  pleasures  and  privileges  which  would  be  a 
very  legitimate  adjunct  of  these  organizations. 

^Vliile  in  London,  I  had  opportunities  of  becoming  acquainted  with 
its  flourishing  Bankers'  Institute.  AVe  ought  to  have  here  institutes  of 
just  about  the  same  class  in  all  our  Clearing-House  cities. 

In  1850,  the  clerks  of  the  Bank  of  England  formed  themselves  into 
a  banker's  literary  association.  The  Directors  of  the  bank  gave  them 
at  once  several  hundred  pounds  and  a  library,  and  also  assigned,  for 
the  use  of  the  association,  rooms  in  the  bank. 

The  gi-eat  banking  men  of  London  are  quite  apt  to  be  good  talkers 
and  Avriters  upon  banking  and  finance. 

Mr.  Gilbart,  the  late  Chairman  of  the  London  &  Westminister 
Bank,  was  an  active  member  of  a  debating  society  of  which  Macaulay 
and  Mill  were  members. 

OTHER   OUTSIDE    HABITS    AND   ASSOCIATIONS. 

As  bank  officers  spend  their  days  and  their  strength  in  positions  of 
large  responsibilities — in  taking  care  of  other  people's  money — it  is,  of 
course,  expected  of  them  that  they  shall  conduct  themselves  in  a  cir- 
cumspect manner,  both  in  and  out  of  the  banks,  which  are  their 
business  homes.  They  should  be  careful  about  the  company  they 
keep  in  their  out-of-business  hours,  and  the  character  of  the  amusements 
and  general  recreative  pursuits  which  they  patronize. 

Yet  it  is  by  no  means  desirable  that  they  should  be  so  under  the 
harrow  of  the  profession  of  banking,  which  they  follow,  as  to  be 
unable  to  throw  off  all  thought  of  it,  and  all  talk  about  it,  when  once 
they  have  shut  their  ledgers  and  their  offices. 

In  order  to  the  attainment  of  the  most  perfect  freedom  from  those 
banking  cares  which  are  apt,  in  so  many  cases,  to  make  the  bank 
officer's  after-business  hours  but  periods  of  weariness  and  depression, 
it  is  well  for  him  to  cultivate  an  out-of-bank  life,  as  far  as  occupations 
and  associations  are  concei*ned,  as  entirely  unlike  that  of  his  business 
hours  as  is  possible. 

As  his  inside  daily  life  is  of  necessity  one  of  a  sedentary  and  confined 


BUSINESS    AND   PLEASURE.  327 

character,  and  involving  considerable  mental  strain,  it  follows  that  the 
best  outside  life  for  him  is  that  which  brings  him  into  the  open  air  and 
keeps  him  out  of  sedentary  and  mental  occupations.  Long  walks, 
gardening,  chopping  wood,  riding  and  di'iving  are  better  for  him  than 
chess,  cards,  late  hours  at  places  of  amusement,  balls,  or  parties. 

That  banker  is  certainly  getting  into  bad  ways,  as  far  as  his  thoughts 
and  environments  are  concerned,  who  can  only  heartily  welcome  as 
out-of -business  companions  those  who  can  prolong  his  business  hours 
and  ways  by  talking  to  him  about  rates  per  cent.,  the  general  condition 
of  trade  and  finance,  and  the  prospects  and  retrospects  of  the  banking 
business. 

The  level-headed  and  thoroughly  competent  banker  gives  undivided 
attention  to  his  business  during  business  hours,  and  in  out-of-business 
hours  is  quite  hkely  to  make  a  daily  practice  of  spending  some  little 
time  in  studies  which  are  in  the  direction  of  his  profession.  But  beyond 
this  he  gives  his  time  and  energies,  if  he  is  a  wise  man,  to  pursuits, 
hobbies,  associations  and  recreations  as  foreign  to  business  as  possible, 
and  will  politely  shun  the  person  who  threatens  to  carry  him  back  by 
talk  of  interest,  stocks  and  bonds,  to  that  banking  business  which  he 
is  trying  to  be  ready  for  on  the  morrow. 

He  should  not  forget  to  reap  all  the  practicable  advantage  that 
comes  from  social  enjoyments,  and  endeavor  to  be  a  good  citizen  and 
neighbor  as  well  as  a  good  banker ;  but  there  are  limits  to  be  set  up, 
for  Ills  strength  must  be  husbanded.  He  can  discharge  his  political 
duties,  yet  it  is  not  necessary  that  he  should  plunge  into  poUtics.  He 
can  do  his  share  of  work  in  religious,  social  and  educational  matters,  yet 
it  is  not  absolutely  necessary  that  a  bank  Cashier  should  try  to  run  a 
Sunday-school,  a  church  with  all  its  week-day  evening  meetings,  or 
serve  as  chairman  of  a  School  committee  or  as  a  member  of  the  Board 
of  Selectmen  or  Aldermen.  Bank  officers  have  broken  down  under  the 
attempt  to  be  very  prominent  in  public  work  and  at  the  same  time 
do  faithful  work  at  the  bank ;  and  there  are  bank  officers  who  have 
neglected  the  interests  of  the  bank  in  trying  to  do  too  much  outside 
work. 

I  have  mentioned  particularly  the  "after-business"  hours,  but  the 
time  in  the  morning,  before  business,  is  a  part  of  the  day  which  may 
be  made  very  valuable  as  a  time  for  work  and  exercise.  And  the  work 
in  question  will  generally  all  be  done  before  breakfast,  since  it  is  well 
for  the  clerk  to  put  his  breakfast  hour  as  late  as  he  can  without  making 
himself  late  at  the  bank.  The  weight  and  brunt  of  his  daily  labor 
must  come  between  his  breakfast  and  dinner,  and  he  must  put  these 
two  meals  as  near  together  as  he  can. 

I  am  now  speaking  of  the  situation,  which  is  almost  universal  in 
banks,  where  the  officers  cannot  get  their  dinners  until  after  bank  hours. 

Bank  clerks  should  avoid  late  hours,  and  rise  early.  Sleep  in  the 
first  portion  of  the  night  is  quite  generally  held  to  be  particularly 


328  PRACTICAL    BAN-KXSfG. 

refreshing.  And,  by  rising  early,  the  bank  officer  may  be  able  to  take 
a  little  physical  exercise  and  do  a  little  profitable  studying  and  reading 
before  he  takes  his  breakfast.  Both  the  mental  and  physical  work 
will  help  to  improve  his  appetite  for  his  morning  meal;  and,  if  he  has 
a  good  appetite  for  his  breakfast  and  eats  a  substantial  one,  it  will  of 
course  stand  by  hhu  well  durmg  the  long  strain  of  the  forenoon  at  the 

bank. 

THE   VACATION. 

An  experienced  and  successful  bank  officer  said  that  he  believed  in 
taking  a  vacation  every  day,  and  had  succeeded  in  doing  so.  These 
daily  vacations  he  did  not  propose  to  pu.sh  into  the  place  of  an  annual 
long  vacation,  for  he  also  believed  in  and  took  his  regular  two  Aveeks' 
furlough. 

His  statement  was  only  his  way  of  stating  the  ideas  which  I  have 
been  trying  to  impress  upon  my  readers.  The  banker  who  does  not 
succeed  in  cultivating  tlie  habit  of  daily  throwing  off  banking — and  by 
proper  thought  and  discipline  ahuost  any  man  can  do  this  when  not 
ill — will  break  down  early  and  find  himself  obliged  to  take  a  long 
vacation. 

It  is  generally  believed,  and  there  are  good  gi'ounds  for  it,  that  not 
only  the  bankers  but  most  business  men  of  this  country  are  more  prone 
to  become  completely  absorbed  in  their  regular  occupations  than  those 
of  the  great  Eui'opean  centres,  who  are  very  successful  in  their 
attempts  to  throw  off  the  shop  when  out  of  it.  They  know  better 
than  the  bankers  of  this  country  how  to  live  a  daily  dual  life  in 
availing  themselves  of  a  vacation  every  day. 

But  a  word  in  reference  to  the  annual  and  actual  vacation  is  what 
1  have  in  mind. 

The  bank  officer's  first  duty  when  his  vacation  time  comes  is  to  cut 
entirely  loose  from  the  bank  and  go  away  somewhere.  He  should 
carry  out  a  programme  that  will  change  his  general  way  of  life  not 
only  in  regard  to  the  hours  he  has  been  in  the  habit  of  giving  to  work, 
but  the  time  spent  at  home  out  of  the  bank.  He  should  endeavor  to 
obtain  complete  change  of  scene,  of  air,  of  surroundings,  of  compan- 
ionship and  of  occupation.  In  order  to  obtain  all  these  there  is  no 
necessity  to  make  any  great  exertion  or  spend  large  sums  of  money. 
The  bank  officer  whose  life  is  passed  in  the  city,  should  seek  rest  and 
recreation  in  the  country  or  the  sea  shore  at  a  season  when  those 
localities  are  likely  to  be  particularly  attractive.  The  officer  of  a 
coiuitry  bank  may  find  it  pleasant  and  profitable  to  take  a  vacation  at 
a  season  of  the  year  when  the  great  city  is  the  most  attractive  to  a  man 
at  leisure,  and  he  may  find  it  pleasant  to  spend  his  fortnight  in 
"  doing"  the  leading  sights  of  the  metropolis  and  mingling  in  the  rush 
and  whii'l  of  a  life  which  is  to  him  a  novelty  and  an  inspiration.  A 
bank  officer's  life  and  work  is  mainly  of  a  sedentary  and  mind-wearing 
character.     He  should  at  all  times  bear  in  mind  that  what  he  needs 


BUSINESS    AXD    PLEASURE.  329 

most  during  his  absence  is  out-of-door  life  and  freedom  from  mental 
labor. 

There  are  bank  clerks  who  have  been  in  the  habit  of  spending  their 
yearly  two  weeks'  vacation  in  getting  on  express  trains  during  mid- 
summer and  going  like  mad  as  fast  and  as  far  as  possible  without  any 
special  regard  to  the  direction  or  attraction  of  their  route.  They  have 
generally  returned  to  their  desks  the  worse  for  their  '"  rest"  from  bank 
work.  A  certain  amount  of  car  riding  is  often  a  necessity  in  order  to 
get  to  a  change  of  scene,  but  the  traveling  part,  where  steam  cars  have 
to  be  used  in  hot  weather,  should  be  deemed  only  a  necessary  evil  and 
made  as  short  as  practicable.  In  New  England  dui-ing  spring  and 
autumn  a  journey  by  horse,  either  by  wagon  or  in  the  saddle,  is  delight- 
ful, but  in  hot  weather  they  should  be  carefully  avoided  as  something 
painful  and  unrefreshing  either  to  mind  or  body.  Trips  by  water  in 
summer  are  delightful  to  people  who  are  fond  of  the  sea,  but  those  who 
are  not  and  those  who  are  subject  to  sea  sickness  should  carefully  shun 
steamers  and  yachts.  Most  bank  officers  have  families.  Those  so 
situated  can  hardly  do  better,  during  a  summer  vacation,  than  take 
their  famihes  into  some  pleasant  rural  region  which  does  not  waste 
money  and  time  to  get  there  and  back  in  hot  and  dusty  trains,  where 
in  green  fields  and  under  pleasant  skies,  with  new  surroundings,  the 
short  furlough  may  be  made  to  glide  by  like  a  pleasant  dream. 


330  PRACTICAL   BAXKINQ. 


CHAPTER    XXI. 

BONDS    OF    SURETYSHIP. 

All  bank  officers  give  bonds.  The  custom  of  so  doing  originated  on 
the  other  side  of  the  water.  But  why  they  should  so  universally  be 
required  to  do  this,  while  clerks  who  work  for  individual  employers  are 
just  as  universally  exempt  from  bond-giving,  is  a  matter  not  quite  clear 
to  most  minds.  In  both  cases  the  men  are  liable  to  occupy  very 
responsible  positions,  and  to  have  in  charge  the  interests  and  property 
of  others. 

In  the  case  of  bank  officers,  the  property  in  their  hands  is  that  of 
the  shareholders  of  the  bank. 

The  clerk  for  private  parties  takes  charge  of  the  money  of  his 
individual  employer,  who  may  be  even  more  disastrously  affected  by 
any  breach  of  trust  on  the  part  of  his  clerk  than  is  the  individual 
shareholder  in  the  bank. 

And  there  are  many  cases  where  the  business  clerk  may,  by  a  defalca- 
tion, spread  distress  and  ruin  over  just  as  Avide  a  field  as  that  which  is 
apt  to  be  disturbed  by  the  irregularity  of  a  bank  officer. 

And„  after  all,  I  ought  to  state  here  that  it  is  quite  common  in 
London  and  other  English  cities  for  merchants  to  require  from  their 
clerks  security  for  the  faithful  discharge  of  the  duties  of  their  positions. 
And  in  some  instances,  though  rarely,  this  practice  has  been  followed 
here. 

On  receiving  a  notification  of  his  appointment,  our  bank  officer  is 
informed  that  he  will  be  expected  to  secure  at  once  bonds  to  the  amount 
of  a  sum  named,  signed  in  a  responsible  manner.  And  the  sum  named 
depends  upon  the  rank  of  the  position  assumed,  and  upon  the  salary 
attached  thereto. 

At  least  this  is  supposed  to  be  the  system  upon  which  this  matter 
is  arranged,  though  I  have  known  instances  where  banks  have  set  up 
rules  regarding  bond-taking  which  seemed  quite  out  of  harmony  with 
their  customs  in  regulating  salaries  and  responsibilities. 

The  bonds  of  bank  officers  generally  range  all  the  way  from  the 
thousand  or  two  of  the  Messenger  or  extremely  junior  under-clerk,  to 
the  tliirty  or  forty  thousand  dollars  of  the  Cashier. 

Presidents  give  no  bonds.  I  have  heard  it  argued  quite  vigorously 
that  these  officers  should  do  so. 

The  form  given  on  the  following  page  (see  Form  76)  is  an  illus- 
tration  of  one   in  general   use   in   banking  institutions.     It  is  that 


BONDS    OF    SURETYSHIP.  331 

of  a  bank  oflBeer's  bond — the  chief  points,  with  the  legal  repetitions 
eliminated : 


Know  all  Men  by  these  Presents, 

That  we, Q^>a.jw*.ju-jJL  y\JLJJLs^ as  principal,  and c^juj^j^j^.  ^ju^JdiL 

o_M^    Sksljj^j^    ^.aJx-jos^a^ji^ as  sureties,  are  holden  and  stand  firmly 

bound  unto 

The  Rhodes  National  Bank,  of  New  York, 

in     the     sum     of^rrttrrrrr-T-r-rr—- rrrrrrT-CDjooLj     <3ii\.&a>^.a.j^/vjLrr:rrrTrr:7?^Tr-rrrrr:rr:rrTdollarS 

to  be  paid  unto  the  said "^aJv^clAji-a  J^.xxiLo(vjo<.<xJl  TT^^j^joJ?. 

Whereas,  the  said ^x)^mjuu^.jl1.   v\JLJdCsi-j .has  been  duly  appointed 

to  the  office  of TL^o^utJLj^.juy. of  the  bank  aforesaid,  by  the  Directors 

thereof,  and  has  signified  his  acceptance  of  the  said  appointment : 

Now  the  condition  of  this  Obligation  is  such.  That  if  the  said 

^jo^M^^MUiX   vV  ,EvjiJLiLj shall  faithfully  discharge  the  duties  of  his  said  office 

and  all  other  duties  that  are,  or  may  hereafter  be,  prescribed  by  the  President 
and  Directors,  for  and  during  the  term  for  which  he  has  been  so  elected,  and 
for  and  during  such  term  of  time  as  he  may  continue  therein,  by  any  re-election 
or  otherwise,  then  this  obligation  shall  be  void,  but  otherwise  shall  -emain  in  full  force. 

It  is,  however,  understood,  that  in  case  of  the  death  of  either  of  the  above- 
named  sureties,  or  in  case  either  of  the  above-named  sureties  shall  at  any  time 
give  notice  in  writing,  to  the  President  or  Directors,  for  the  time  being  that  he 
does  not  ^ish  to  be  held  any  longer  responsible  on  this  obligation,  thereupon 
both  of  the  above-named  sureties  shall  be  discharged  from  liability  on  account 
of  any  default  of  the  said  principal  which  may  occur  after  thirty  days  from  and 
after  the  notice  of  such  death,  or  of  such  wish  to  be  discharged  as  aforesaid. 

Signed  and  sealed  in  presence  of 


"Loiv-o^a^.   V\xjJljLA.A*-,_xi^jk^.               I  c^ok_>ju_A/.jiJL    vV.fvjijtfl...  (Seal.) 
Witnesses:  -{ lAfjJJLLa.^.^^  (Sjclx.JL!lj.  \  JLjlju>J-j>.  cs^aa-^^cLL (Seal.) 

[TJi.     <3)a.     "^KjcJULlJU^.  j^3\jLJO^,>VJJ.    ^-XiJvJO.oA^^O^(SEAL.) 


Form  76. 
"WELL    AND    FAITHFULLY." 

An  expression  which  embodies  the  central  point  in  the  form  of 
fidelity  bonds  most  in  use  in  banks  is  one  over  which  there  have  been 
many  lively  debates  and  many  sharp  legal  contests  in  courts  in  various 
States,  with  varying  results — decisions  of  many  hues.  Without  entering 
into  an  exhaustive  legal  discussion  of  this  point  of  the  rights  and 
responsibilities  of  banks  and  their  employees  under  bonds  which 
guarantee  officers  in  the  phraseology  we  have  quoted  above,  a  few 
practical  reflections  and  suggestions  germain  to  the  matter  are  in  order. 

These  bonds  are,  primarily,  guarantees — insurance  of  the  ofiicer's 
honesty.  And  yet,  no  one  can  question  that  they  cover  other  contin- 
gencies. They  may  be  held  to  insure  the  employer  against  the  careless- 
ness, the  thoughtlessness  or  the  willful  neglect  of  the  bonded  employee. 


332  PRACTICAL   BAXKIXG. 

But  any  attempt  to  fasten  upon  the  bond  other  responsibihty  than  this 
is  sure  to  open  up  questions  that  must,  when  in  dispute,  be  I'eferred  to 
courts — to  juries  and  to  judges. 

It  lias  been  claimed  that  this  guarantee,  that  an  officer's  duties  shall 
be  performed  "well",  holds  the  signers  of  such  a  bond  responsible  for 
losses  that  may  come  from  an  officer's  want  of  skill — his  dullness  and 
stupidity.  But  it  would  seem  possible  that  the  employer — the  bank — 
ought  to  be  somewhat  responsible  in  these  regards.  It  ought  to  know, 
when  it  selects  an  officer,  whether  or  not  he  has  natural  fitness  for  the 
work  it  is  to  give  him — whether  his  abihties  are  equal  to  the  task  it  sets 
before  him.  And  the  bank,  which  has  better  opportunities  than  the 
bondsmen  for  judging  in  these  matters,  should  make  the  most  strenuous 
endeavors  to  start  right  in  the  selection  of  its  clerks,  and  should  be 
quick  to  move  in  the  matter  of  correcting  any  mistakes  it  may  have 
made  in  making  up  its  staff,  by  retiring  unsuitable  men. 

In  a  celebrated  legal  contest,  covermg  this  point,  it  was  finally  held 
that  a  bank  officer  who  did  his  work  as  well  and  faithfully  as  he  knew 
how  had  hved  up  to  the  letter  and  spirit  of  his  bond,  blunders  and 
consequent  losses  to  the  contrary  notwithstanding. 

There  is  another  item  of  considerable  interest  belonging  to  this 
bond  question. 

To  make  errors  is  a  part  of  the  system  of  banking,  if  I  may  so  express 
myself.  That  mistakes  must  occur  in  running  the  machinery  and 
working  the  methods  of  the  best  regulated  banks  is  a  fact  that  must 
be  discounted.  An  able,  skillful,  honest  and  faithful  bank  officer  can- 
not be  expected  by  his  bank,  nor  can  he  himself  hope,  to  run  along  in 
any  leading  and  highly  responsible  position  in  a  bank — say  like  that  of 
a  Paying-Teller  for  illustration — year  after  year  without  making  errors 
which  entail  loss  of  money. 

It  is  for  common  sense  and  common  law  to  say  what  sort  of  a 
division  of  the  risk  of  a  business  of  this  kind  shall  be  made  between 
employer  and  employee,  and  what  service  and  how  many  errors  are  in 
any  given  circumstances  consistent  with  the  faithful  discharge  of  duties. 

"AND  SUCH  OTHER  DUTIES  AS  MAY  BE  PRESCRIBED." 
This  is  another  expression  in  very  general  use  in  bank  officers'  bonds 
— an  expression  intended  to  hold  the  signers  thereof  fully  responsible 
for  the  bonded  man's  faithful  discharge  of  whatever  duties  may  be 
assigned  to  him  by  the  bank  which  has  retained  him  and  specially 
bonded  liim  for  a  particular  office. 

In  the  current  workings  of  a  bank,  especially  where  the  institution 
is  a  large  one,  with  many  departments  and  many  clerks,  it  is  inevitable 
that  there  should,  from  time  to  time,  be  more  or  less  shifting  of  men 
and  changing  of  works.  Vacations,  sickness,  stress  of  work  in  some 
departments,  and  current  light  work  in  others,  demand  these  transfers. 
And  the  wording  in  the  bond,  to  which  we  have  called  attention,  was 
intended  to  cover  the  risks  incident  upon  these  changes — to  grarantee 


BONDS    OF   SURETYSHIP.  333 

that  the  officer  bonded — for  instance,  as  a  Teller — should  also  be 
under  the  same  guarantee  if  temporarily  transferred  to  discount  work. 

But  it  should  be  fully  understood  by  banks  and  their  employees 
that  there  are  well-defined  limits  to  the  extent  to  which  this  very 
general  guarantee  can  be  extended.  The  expression  in  question  has 
been  passed  upon  by  courts,  and  the  decisions  which  have  been 
reached,  and  which  would  seem  to  be  entirely  in  harmony  with 
common  law  and  common  sense,  are  to  the  effect  that  the  bond  will 
only  hold  when  the  extra  work — the  work  other  than  that  for  which  tlie 
officer  has  been  retained — is  of  a  character  not  inconsistent  with  those 
duties  in  which  he  is  regularly  employed — not  out  of  the  line  of  work 
to  which  he  is  accustomed,  and  which  he  has  been  particularly  hired 
to  discharge. 

It  cannot,  for  illustration,  be  supposed  for  a  moment  that  bank 
Directors  could,  under  this  clause,  with  bond  safety,  direct  a  Messenger, 
entirely  unused  to  the  Paying-Teller's  duties,  to  take  charge  of  a 
Paying-Teller's  department. 

There  is  another  bond-point  of  value  which  deserves  particular 
notice.  Banks  are  pretty  sure  to  lose  their  hold  upon  signers  of 
officers'  bonds,  if  their  Directors  misuse,  mismanage,  and,  in  a  general 
manner,  misdirect  the  bank  in  their  charge.  There  have  been  several 
suits  at  law,  in  bank-wrecking  cases,  where  this  has  been  made  evident. 

CARE    OF   THE    BONDS. 

After  a  bank  has  accepted  an  officer's  bonds,  they  are  filed  away, 
against  a  time  of  demand  for  them  and  should  be  in  charge  of  the 
President  or  the  Board  of  Directors  of  the  bank,  and  in  a  secure  place. 
At  least  once  a  year,  a  committee  of  the  Board  should  go  over  these 
bonds,  making  a  careful  examination  of  them,  and  should  make  a 
report  of  the  results  of  this  examination  to  the  full  Board.  This  report 
should  be  made  in  a  formal  manner,  and  entered  on  the  Director's 
record. 

I  have  known  of  many  very  surprising  instances  of  neglect  in  attend- 
ing to  this  matter  of  supervising  the  life  of  bank  officers'  bonds.  The 
most  notable  cases  of  this  sort  have  been  made  prominent  in  instances 
where  banks  have  failed  and  passed  into  the  hands  of  Receivers,  who 
have  sometimes  discovered  the  officers'  bonds  to  be  of  very  little  value, 
because  their  signers  were  mostly  persons  who  had  failed  or  died  long 
ago,  or  who  had  never  been  financially  responsible. 

WHICH  ARE  THE  BEST  BONDS? 
There  are  few  points  of  more  vital  interest  to  bank  officers  and 
bank  owners  than  those  wliich  relate  to  the  comparative  value  of  the 
bonds  of  bank  officers  wliich  are  furnished  by  the  Fidelity  Insurance 
Companies  and  by  individual  signers  of  bank  officers'  bonds.  Although 
the  merits  and  demerits  of  these  two  systems  of  bond-giving  are  just 
now  being  discussed  quite  earnestly  in  National  bank  circles,  and  the 


S34  PRACTICAIi    BANKING. 

company  insurance-system  is  coming  more  and  more  into  vogue,  there 
seems  no  immediate  prospect  of  the  entire  abandonment  of  the  old- 
fashioned  way  of  bond-giving— that  of  furnishing  as  hostages  an 
employee's  best  friends.  There  are  to-day  on  the  bonds  of  bank 
oflScers  of  New  England,  if  not  of  those  in  all  quarters  of  this  country, 
ftir  more  individual  sureties  than  those  of  guarantee  companies. 

On  behalf  of  the  security  supplied  by  the  guarantee  companies 
there  are  many  very  strong  arguments  to  be  urged.  I  have  only  the 
space  to  pomt  out  a  few  of  these,  and,  as  1  do  this,  I  propose  to  weigh 
them  impartially. 

It  is  said  that  it  has  always  proved  very  difficult  to  collect  individual 
bonds,  where  default  of  the  principal  has  led  banks  to  levy  upon  them, 
and  that,  in  a  vast  number  of  cases  of  defalcation,  the  banks  have 
completely  failed  in  their  attempts  to  realize  upon  these  indi%adual 
bonds.  I  readily  allow  that  this  has  been  the  case,  but  these  failures 
have  often  been  the  result  of  carelessness  upon  the  part  of  the  banks 
in  not  renewing  bonds  of  officers  when  they  have  changed  their  posi- 
tions in  the  banks,  or  in  not  exercising  due  care  relative  to  these 
securities  in  some  other  points. 

It  should  also  be  borne  in  mind  in  this  connection  that  banks  Avill 
find  it  no  easy  task  to  collect  a  bond  of  a  guarantee  company  if  that 
company  has  been  legally  released  by  the  negligence  of  the  bank;  and 
it  should  also  be  still  further  borne  in  mind  that  it  does  not  always  follow 
that  a  guarantee  company  will  in  every  instance  prove  in  the  end  a 
better  debtor  on  a  bond  than  an  individual ;  for  in  these  days  corpora- 
tions collq,pse  as  well,  as  individuals. 

Another  important  point  in  favor  of  the  methods  and  management 
of  the  guai'antee  companies,  and  one  which  is  not  always  alluded  to  in 
discussing  the  matter  in  question  is,  that  guarantee  companies  not  only 
aim  to  fully  assure  themselves  at  the  start  of  the  worthy  character  of 
the  men  they  insure  and  will  not  insure  a  man  unless  they  are  quite 
confident  they  know  all  about  him,  but  they  follow  him  up.  They 
institute  a  watch  over  the  way  and  walk  of  the  men  upon  whom  they 
have  taken  risks.  And  if  by  this  justifiable  supervision — espionage,  if 
we  may  be  permitted  to  so  term  it— they  find  that  a  man  is  unworthy  of 
their  confidence — a  bad  risk — they  will  stop  insuring  him  and  withdraw 
their  pohcies.  And  such  a  withdrawal  is  equivalent,  of  course,  to  a  note 
of  warning  to  the  employers— a  note  of  warning  which  may  often  be  of 
very  great  value. 

It  nmst  certainly  be  acknowledged  that  the  individual  signer  of  a 
bank  officer's  bonds  has  quite  often  very  infrequent  opportunities  of 
watching  the  business  and  private  career  of  his  man.  Let  us  hope  that 
he  will  seldom  fl^nd  need  of  doing  this. 

And  there  is  still  another  point  to  be  scored  in  favor  of  the  standard 
guarantee  companies  in  this  country  and  in  Europe.  They  have  from 
the  first  been  prompt  and  vigorous  in  following  up,  prosecuting  and 


BONDS    OF    SURETYSHIP,  335 

punishing  clerks  and  others  who  have  broken  faith  under  their  fidelity- 
policies.  They  have  proved  themselves  enemies  to  the  practice  of 
compromising  with  defaulters  and  thieves.  We  have  had,  under  the 
old  system  of  bond-giving,  some  most  scandalous  instances  of  com- 
promising with  rogues  who  have  been  able  to  pay  back  tempting 
proportions  of  their  abstractions,  and  this  commendable  course  of  the 
guarantee  companies  should  be  recorded  to  their  credit. 

Some  claim  that  excellent  men  are  sometimes  kept  out  of  good 
situations  in  banks  because  they  cannot  secure  individual  bondsmen. 
I  think  that  such  instances  are  exceedingly  rare.  I  have  never  observed 
even  one.  But  I  have  known  unfit  persons  to  be  thus  shut  out  from 
the  places  in  question. 

Others  urge  as  an  argument  against  the  personal  bond  system  that 
bank  officers  place  themselves  under  very  disagreeable  and  even  dan- 
gerous obhgations  in  accepting  bonds  of  this  character,  and  in  very 
unpleasant  positions  in  asking  for  them. 

But  the  thoughtful  man,  who  fully  recognizes  that  we  cannot  get 
along  in  this  world  without  being  under  obligations  to  everybody,  on 
all  sides,  will  give  but  little  heed  to  this  objection  and  will  consider 
contingencies  of  this  sort  as  so  extremely  rare  as  to  be  hardly  worthy 
of  being  counted  as  a  force  in  the  premises. 

Tiiese  individual  bonds  are  generally  signed  by  kind  and  generous 
men  of  means,  for  the  simple  purpose  of  helping  along  the  deserving. 
They  neither  hope  for,  nor  wish  for,  any  other  recompense  than  the 
consciousness  of  having  done  for  others  what  they  would  like  others 
to  do  for  themselves  under  similar  circumstances.  , 

It  often  affords  a  good  man  a  deal  of  satisfaction  to  help  along  a 
yotuig  man  by  signing  his  bonds ;  and,  in  a  vast  majority  of  cases,  he 
takes  very  little  risk,  and  a  good  deal  of  pleasure,  in  so  doing.  The 
rich  man,  who  is  a  wise  and  good  man,  is  aware  that  it  is  as  necessary 
for  him  to  keep  the  pores  of  his  heart  open  as  those  of  his  body,  if  he 
would  enjoy  good  mental  and  physical  health. 

MORAL  VALUE  OF  A  BANK  OFFICER'S  BOND. 

But,  after  all,  what  may  be  termed  the  moral  value  of  a  bank 
officer's  bond  is  something  deserving  here  of  careful  consideration,  since 
upon  this  point  hang  the  main  issues  of  the  question  we  are  discussing. 

This  moral  value  of  a  bank  officer's  bond  may  be  large.  Its  actual 
money  value,  compared  with  the  opportunities  which  exist  under  it 
for  going  wrong,  is  almost  always  really  insignificant.  The  bank 
officer  gives  a  bond  for  ten  or  twenty  thousand  dollars,  and  enters 
upon  a  position  of  trust  and  great  responsibility,  where  he  may,  if  dis- 
honestly disposed,  default  in  hundreds  of  thousands  of  dollars. 

And  this  moral  weight  and  force  of  a  bond  must  always  depend 
largely  upon  the  character  of  its  origin.  It  is  an  hostage  given — a 
testimonial  furnished.  And  when  signed,  without  compensation,  by 
the  personal  friends  and  family  of  a  bank  officer,   who  have  the  best 


336  PRACTICAL    BANKING. 

opportunities  in  tlie  world  for  knowing  Avhat  he  is  and  wliat  lie  is 
likely  to  continue  to  be,  it  is  in  many  respects  the  best  sort  of  hostage 
and  testimonial  that  can  be  given,  and  the  last  one  that  is  likely  to  be 
violated  or  prove  valueless. 

The  bank  officer  who  wilfully  violates  bonds  of  this  sort,  ought  to 
be  consigned  to  a  treadmill  for  life.  I  am  glad  the  record  shows  that 
marvellously  few  of  them  have  done  so. 

.  The  guarantee  companies  have  a  good  field  before  them,  and  can  do 
a  good  work — can  work  along  in  perfect  harmony  with  the  individual 
bond  system.     They  are  specially  needed  in  cases  where  probate,  or 
official  bonds  to  the  government,  of  vast  amounts,  are  required. 
TAKING   THE    OATH. 

In  the  early  days  of  banking  in  this  country,  when  this  business 
was  all  done  under  State  laws,  there  were  in  existence  many  curious 
motliods  of  practice  in  the  administration  of  the  internal  affairs  of 
banking  institutions.  It  was  quite  a  common  thing  in  those  old  days 
to  require  all  bank  ofiicers  to  take  an  oath  of  oflBce,  but  I  beUeve  there 
is  no  record  whether  the  bond  was  considered  as  supplementary  to  the 
oath  or  the  oath  as  a  postcript  to  the  bond. 

Here  is  a  form  (see  Form  77)  of  one  of  the  old-style  oaths — one  that 
was  administered  down  to  a  period  as  late  as  1854  to  the  officers  of  a 
leading  Massachusetts  bank,  which  is  still  running  along  and  doing 
a  safe  business  without  the  use  of  oaths  of  this  sort : 


••  i C5_Aj(k.n^jiJLj  ^M^JjdL do  solemnly  swear  that  I  mil  faithfiilly, 

and  to  the  best  of  my  ability  and  knowledge,  perform  the  duties  now  assigned, 

or  which  hereafter  may  be  assigned,  to  me  as ■LoocaJv.a_iuv. of  the 

<^toLju^JL<x>^  iToxjkjo^C and  that  I  will  not  impart  any  knowl- 
edge of  the  concerns  of  said  bank,  except  to  those  persons  who  have  the 
direction  thereof,  unless  required  in  a  Comt  of  Justice,  so  help  me  God. 

"(Signed,  etc.)  G-ilxjo^jxjlj  Q^MjJji.L.. 


Form  77. 

This  custom  of  swearing  in  bank  ofla.cers  is  of  English  origin,  and  I 
found  the  English  banks  still  following  it. 

FIDELITY    COMPANIES'    INQUIRIES. 

It  will  be  of  interest  to  notice  the  thoroughness  with  whieli  one  of 
these  guarantee  companies  looks  up  a  man.  When  persons  apply  to 
one  of  these  companies  for  an  insurance  of  their  fidelity,  they  are 
requested  to  give  the  names  of  at  least  three  parties  as  special  reference 
— persons  to  whom  they  wish  applications  to  be  made  for  knowledge 
of  their  character,  standing,  general  habits,  and  natural  qualifications. 
The  company  uses  the  names  as  .suggested.  They  also  take  additional 
measures  to  acquaint  themselves  with  their  bond-seeking  men.  Among 
these  methods  of  inquiry  is  the  following : 

They  employ  the   mercantile   agencies   of  the  country — concerns 


BONDS    OF    SURETYSHIP.  337 

■which  have  excellent  luachhiery  for  the  Avork — to  make  exhaustive 
investigation  of  these  ap[)Iicants.  And  the  character  of  the  investiga- 
tions they  undertake  is  best  shown  by  the  following  copy  (see  Form  78) 
of  one  of  their  examination  papers — an  actual  working  model,  names 
only  changed : 


(X.  B. — It  is  xiarticularly  requested  that  no  inquiries  he  made  of  the  Einploycr  or  Kmiuoyee 

in  any  cane.) 

Please  give  us  in  confidence,   and  for  our  own  exclusive  use,   what   information   you  have 

respecting       '\-.    C£>.    c5pj»A*.>JOv,    x>^.a_a_)    '2ilf>       iov  the  past — t^    ^aa^Ou-^/JCka, 

employed  as 1) oxl^o^^C-^OljlIijla.  JLju.  tKjLj  Ci> jlj-kJC-Vv  J^  Oou3_oJ«., 

Hemarks:  ] 

INFORMATION    DESIRED. 

Is  he  married  I      JS-o. 

If  so,  what  family?       ■ 


l)  OXt(X.A_x!L(V,    juv-^ijtiv    JL<xtt>_ft_^^ 


Does  he  hoard,  or  is  he  a  householder .' 

Are  his  habits  good  ?     /^J— il/l  ;    ^^\*JLu.  JL(X-«_k.,  .a^og-X  ikJUj^-j-jcJixjuL  XjLji*A.iiJLA.uxXjL. 

Is  his  style  of  living  compatible  with  his  position  J  — Nxl  Ax>_x».i)Jl- 

Are  any  of  his  family  (depending  on  him)  of  extravagant  or  bad  habits  I J\a. - 

Is  he  honest  and  of  good  general  character  .'--.^Xju6. 

Has  he  any  property,  and,  if  so,  what? Jjxl>/^  X  X,lrt.j.»^C  ,Wj>->  >>.^cx.j6k 

Is  it  encumbered  ?    

If  in  debt  give  particulars  ? <=Ujo^j»^  X  xi?.j>_v^C  m  .»_)  ^jftv  .^.-o^  xSLaJixX 

Oeneral  reputation  for  reliability,  etc.  ? <<jA.jKjyX-<J.ja.-A,ji> _ 


Bemarks:  < 
Montreal,  Xxl^-^j-aJLla.  'J,    I  ^c|0.        Sutjscrilber  No.  SoL,. 


Fomi  78. 
OFFICERS'    BONDS    WITH    EXTENDED    NATIONAL   BANKS. 

Under  the  very  general  renewal  of  charters  by  our  National  banks, 
there  has  arisen  an  interesting  and  most  important  question  relative  to 
the  status  of  the  bonds  of  their  officers  in  this  form : 

When  a  bank  gets  an  extension  of  its  charter,  is  it  obliged,  for  its 
own  safety  in  the  premises,  to  call  upon  its  officers  for  a  renewal  of 
their  personal  bonds  ? 

The  point  has  been  made  by  A.  S.  Pratt  &  Sons,  of  Washington, 
the  Washington  agents  of  many  National  banks,  that  re-chartered 
National  banks  should,  as  a  measure  of  prudence,  require  from  their 
officers  a  renewal  of  their  bonds,  because  the  question  whether  such 
a  renewal  is  needed  has  never  been  passed  upon  by  the  Courts,  and  it 
has  been  difficult  to  collect  bank  officers'  bonds  on  account  of  technical 
defects  found  to  exist  in  them  when  they  were  brought  to  the  severe* 


338  PRACTICAIi    BA^'^KING. 

test  of  a  lawsuit.  They  have  scattered  widely  among  the  National 
banks,  in  a  digest  of  reorganization  duties  prepared  by  theui,  the 
statement  that  one  of  these  duties  is  a  renewal  of  the  bonds  in 
question.  The  banlis  receiving  this  "  digest "  very  naturally  concluded 
that  it  was  a  digest  of  existing  laws  and  decisions  relative  to  those 
questions.  But  it  is  important  to  remember  that  the  statement  of 
the  renewal  being  a  necessity  was  not  made  as  a  conclusion  of  law 
but  as  a  suggestion. 

I  think  that  the  recommendation  is  an  unwise  and  unnecessary 
one,  and  unhesitatingly  answer  the  question,  stated  above,  in  the 
negative.  The  reason  for  this  opinion  is  found  m  the  National  Bank 
Act.  And  it  is  a  matter  of  surprise  that  many  intelligent  bank 
Managers,  with  this  Bank  Act  before  them,  have  obliged  their  corps  of 
officers  to  go  through  all  the  trovible  of  making  the  renewal  in  question. 

Here  I  let  the  Bank  Act  speak  for  itself  on  this  subject.  It  makes 
the  plain  declaration,  for  the  purpose  of  covering  this  and  similar 
points,  that  the  bank  which  extends  its  existence,  by  a  renewal  of 
its  charter,  "shall  continue  to  be  in  all  respects  the  identical  association 
it  was  before  the  extension  of  its  period  of  succession. " 

But,  if  the  chaiter-extended  bank  was  not  thus  legally  proclaimed 
the  same  bank,  the  form  of  bonds  almost  invariably  given  by  bank 
officers  would  stand  firm  and  strong  with  the  renewed  institution,  for 
their  reading,  in  very  vital  clauses,  is  as  follows : 

"  as  sureties  are  hoi  den  and  stand  firmly  bound  and  obliged,  unto  THE 
RESERVE  NATIONAL  BANK  OF  NEW  YORK,  in  the  sum  of  dollars, 

to  be  paid  unto  the  said  RESERVE  NATIONAL  BANK,  their  successors  akd 
ASSIGNS  ;  unto  which  payment,  well  and  truly  to  be  made,  we  bind  ourselves,  and  our 
respective  heirs,  executors,  and  administrators,  jointly,  severally,  and  fii-mly,  by 
these  presents,  etc.,  etc." 

It  is  easy  for  any  intelligent  banker  or  lawyer,  by  studying  the  bonds 
and  the  United  States  laws,  to  reach  the  conclusion  that  there  is  no 
real  need  of  making  the  change  in  question  when  a  bank  obtains  an 
extension  of  its  charter. 

If  there  is  no  necessity  for  so  doing  why  put  bank  officers  and 
bond-signers  to  the  trouble  of  going  through  useless  forms  simply 
because  parties  who  have  not  carefully  studied  the  matter  hinted  that, 
as  a  matter  of  prudence,  it  would  be  better  to  obtain  the  renewal. 


COMMONPLACE    CARES.  d'iiQ 


CHAPTER    XXII. 

COMMONPLACE    CARES. 

It  has  always  been  a  question  with  banking  men  whether  banking 
rooms,  in  our  large  towns  and  cities,  should  be  located  upon  the  first 
or  second  floors  of  their  building.  Some  excellent  bank  Managers  are 
heard  asserting  that  they  could  never  think  of  having  their  banking 
rooms  up  stairs,  while  other  good  bankers  assert,  just  as  strongly,  that 
it  is  a  very  poor  plan  indeed  to  locate  them  on  first  floors. 

There  is  much  to  be  said  on  both  sides  of  this  question.  There  has 
been,  of  late  years,  a  very  active,  and,  in  some  respects,  an  over-done 
competition  among  National  banks  for  business  —for  deposit  accounts. 
This  competition,  which  has  culminated  in  the  adoption  of  the  very 
wide-spread  custom  of  paying  interest  upon  demand  deposits,  and 
granting  immediate  credit,  free  of  exchange  charges,  for  deposit  of 
checks  and  drafts  payable  far  and  near,  has  also  led  bank  Managers  to 
cater  for  trade  through  the  influence  of  very  elegant  banking  apart- 
ments upon  the  groiind  floors  of  attractive  buildmgs  situated  in  central 
locations. 

Without  doubt  it  is  now  the  general  opinion  that  there  has  been,  in 
very  many  quarters,  too  much  extravagance  and  ornateness  of  display 
indulged  in,  in  fitting  up  bank  rooms.  Withhi  the  last  few  years  there 
has  been  a  reaction  in  this  matter,  and  the  Pullman-palace-car  style  of 
arranging  and  fitting  up  banking  quarters  has  been  giving  place  to 
ideas  of  simplicity  and  propriety  in  this  matter. 

' '  The  best  trade, "  if  we  may  be  pardoned  for  using  the  expression 
in  this  connection,  is,  in  these  days,  more  likely  to  be  diverted  from, 
than  attracted  to  banks  by  plate  glass,  gilded  rails,  marbled  counters, 
and  rich  decorations. 

It  is  urged  in  favor  of  rooms  on  the  street  that  such  are  more  likely 
to  attract  paying  business,  since  the  average  depositor  of  the  period  is 
in  a  hurry  and  does  not  wish  to  climb  up  stairs.  But  this  objection  to 
climbing  rather  fades  away  in  the  light  of  the  reflection  that  this 
average  depositor  generally  keeps  a  good  supply  of  boys,  who  will  go 
where  they  are  sent,  and  who  can  go  up  the  stairs  two  steps  at  a  time 
without  much  thought. 

I  do  not  forget  that  the  bank  wants  also  to  be  accessible  enough  to 
lend  its  money  easily,  but  I  have  noticed  that  borrowers  who  hear  that 
a  bank  has  gained  largely  at  the  clearhig  usually  find  very  little 
diflBculty  in  climbing  stairs  in  s€(^rch  of  low-priced  money.     If  afl 


340  PRACTICAL   BAXKIXG. 

advantage  of  convenience  is  upon  tlie  ssido  of  the  low-down  bank,  that 
of  gi-eat  safety  in  many  points  is  with  the  one  up-stairs. 

Of  more  importance  is  the  question  of  the  internal  arrangement  of 
the  rooms.  At  any  rate  this  matter  is  of  pre-eminent  importance  to 
the  pubUc  and  to  the  working  officers  of  the  bank. 

It  is,  of  course,  exceedingly  desirable  that  all  banking  rooms  should 
be  well  ventilated,  well  lighted,  and  properly  warmed  at  season.e 
needing  artificial  heat. 

In  the  matter  of  ventilation,  there  are  plenty  of  theories  afloat.  In 
giving  attention  to  this  point,  adopt  the  most  sensible  and  advanced 
ideas  regarding  the  matter,  and  see  that  they  are  carried  out. 

The  best  winter  ventilators  of  any  room  are  open  fires  in  a  grate,  or 
the  old  pattern  Franklin  stove,  Professor  Williams  of  the  Royal  Society 
to  the  contrary  notwithstanding. 

I  have  in  mind  one  of  the  pleasantest  banking  rooms  in  the  country, 
which  is  heated  and  finely  ventilated  by  a  fire  in  a  large  old-fashioned 
Franklin  stove,  to  which  is  attached  long  piping  of  Russia  iron. 

Apparatus  for  the  use  of  wax  in  sealing  should  have  special 
ventilating,  smoke-clearing,  arrangements. 

For  material  for  the  finish,  desk,  and  counter  woi-k,  ash,  oak,  or 
cherry  is  much  preferable  to  any  darker  woods. 

In  small  banks,  where  only  one  or  two  officers  are  required,  the 
room  arrangements,  as  regards  situation  of  desks,  counters,  and 
general  accoimnodation  for  the  public,  can  be  quite  simple  and  yet 
of  a  neat,  attractive,  and  convenient  character. 

But  in  planning  accommodations  for  many  departments,  a  heavy 
corps  of  clerks  and  a  very  large  business,  banks  are  called  upon  to 
exercise  the  most  skill  and  common  sense  in  fitting  their  workuig 
machinery — rooms,  desks  and  public  counters — to  meet  the  demands 
of  their  situation. 

It  is  poor  economy  to  give  the  clerks  scant  room.  They  should  be 
generously  supplied  with  space  ia  which  to  do  their  work,  plenty  of 
desk  room  for  the  books,  and  plenty  of  counter  room  for  handling 
money,  sorting  checks,  etc. 

Then  the  desks  should  be  so  arranged  as  to  put  to  profitable  use  the 
best  daylight  the  location  of  the  rooms  will  afford.  If  there  are  dark 
corners  and  windowless  recesses,  they  should  not  be  occupied  by  officers 
who  are  to  be  constantly  called  upon  to  handle  money,  to  be  on  the 
watch  against  taking  bad  money,  to  pay  checks,  and  to  be  on  guard 
against  paying  forged  checks,  but  should  be  used  by  the  public,  who, 
in  dealing  with  the  bank,  come  and  go  quickly,  and  are  not  so  specially 
in  need  of  the  brightest  light.  In  fact,  all  tlie  bank  officers  should  be 
given  the  best  possible  light,  while  the  Directors'  rooms,  reception 
rooms,  etc.,  can  take  up  those  portions  of  the  area  which  cannot  be  so 
•well  lighted. 

It  is  in  the  direct  interest  of  a  bamk  that  the  health  and  eyesight  of 


COMMONPLACE    CARES.  341 

its  officers  should  be  protected  as  far  as  possible;  and  oflieers  who  are 
condemned  to  work  by  gas-light  in  banking  hours  are  endangering 
both  liealth  and  eyes. 

There  are  very  many  instances  in  banks  where  architects,  who  have 
not  had  in  view  the  right  end,  in  arranging  desks  and  counters  have 
deliberately  consigned  bank  Tellers  and  Book-keepers  to  a  hfe  of  gas- 
hght  misery  by  giving  them  the  dark  side  of  a  bank  and  the  public  and 
the  Directors  the  best  light  of  the  room. 

Tellers  should  be  located  where  the  dealing  public  can  readily  reach 
them. 

Book-keepers  should  be  within  easy  reach  of  Tellers,  particularly 
Paying-Tellers,  for  these  last  officers  are  continually  wishing  to  consult 
ledger  balances,  without  noticeable  delay  or  objectionable  conspicu- 
ousness. 

It  is  not  at  all  pleasant  for  a  check-drawer,  particularly  if  he  is  an 
honest  and  sensitive  man,  to  be  called  upon  to  observe  balance- 
hunting  delays  over  his  good  check.  Customers  have  been  driven 
from  banks  by  obnoxious  points  of  this  nature. 

Cashiers  should  be  placed  where  they  can  quickly  consult  with 
Presidents,  where  working  Presidents  are  in  the  chairs. 

Messengers  and  Collection  Clerks  should  be  located  near  each  other, 
for  the  Messenger  is  the  assistant — the  complement  of  the  Collection 
Clerk.  . 

Discount  officers  should  have  their  desks  where  they  can  be  con- 
veniently reached  by  the  customers  of  the  bank. 

Every  bank  should  have,  if  possible,  a  reception  room,  where  officers 
can  meet  callers,  a  neat  lavatory,  and  a  limch  room. 

With  the  bank  rooms  thus  thoughtfully  and  conveniently  arranged 
the  next  point  in  order  is  as  to  their  daily  care. 

CARE    OF  THE  ROOMS. 

There  are  few  if  any  reasons  why  all  banking  rooms  should  not  be 
clean,  and  if  they  are  otherwise  it  is  not  as  a  general  rule  because  the 
shareholders  do  not  desire  that  they  should  be  so,  as  they  are  perfectly 
willing  to  pay  to  have  them  kept  clean,  but  it  is  on  account  of  the 
carelessness  and  want  of  taste  on  the  part  of  the  Directors  or  Cashier 
and  their  neglect  to  see  that  subordinates,  particularly  the  Messenger 
or  janitor,  do  their  duty. 

Nothing  short  of  the  strictest  order  and  neatness  should  be  accepted 
as  the  result  of  the  janitor's  labors. 

A  dirty,  badly  ventilated  bank  room  is  not  only  demoralizing  and 
injurious  to  all  its  officers  but  it  is  bad  in  a  business  sense  because  the 
opposite  state  of  affairs  draws  business  by  attracting  new  accounts. 
Why  is  it  not  a  good  idea  to  have  the  windows  of  a  bank  kept  clean, 
its  floors  and  stairs  scrubbed  or  varnished,  its  walls  and  ceilings  neatly 
colored,  its  public  desks  well  supplied  with  public  stationery,  its  desks 
tidy  and  its  floors  not  littered  with  stray  papers  ?    The  interiors  of 


343  PRACTICAL   BANKING. 

many  of  our  banks  are  open  to  considerable  improvement  in  this  direc- 
tion. Bankers  have  an  idea  that  our  cities  eclipse  the  world  in  the  cost 
and  elegance  of  theii'  banking  rooms.  It  is  a  fact  that  many  of  them 
have  been  fitted  up  without  much  regard  to  expense  and  in  some 
insiances  with  unAvarrantable  extravagance,  but  some  of  the  most 
ornate  of  these  offices  are  as  open  to  the  charge  of  untidiness  as  the 
humble  little  banking  rooms  m  the  coi-ner  of  a  wooden  house  in  the 
rural  districts. 

No  offense  is  intended  by  presenting  any  unfavorable  comparisons, 
but  the  banking  rooms  of  our  American  towns  and  cities  are  not  upon 
the  average  nearly  as  neat,  tidy  and  appropriate  for  their  business  as 
those  of  foreign  countries. 

CARE  OF  THE  BANK  WASTE  PAPER. 

Neat  and  tasteful  waste-paper  baskets  should  be  supplied  to  the 
various  departments  of  the  bank,  and  there  should  be  a  rule  that  no 
piece  of  paper  of  any  sort  should  be  thrown,  or  allowed  to  remain  on 
the  floor  of  the  rooms.  Otherwise,  money  or  valuable  documents  may 
be  lost  by  dropping  them  accidentally  into  a  confused  mass  of  litter 
under  foot,  while  if  the  floors  are  kept  scrupulously  clear  of  all  paper 
the  fallen  check  or  bill  will  at  once  attract  attention  and  be  rescued 
instead  of  being  lost  in  the  mass — taken  to  be  waste-paper  like  the 
rest  of  the  litter. 

But  even  in  the  waste  baskets  lurks  a  source  of  danger,  and  'Caluable 
papers  may  quickly  through  accident,  be  hidden  in  them,  and  soon  be 
consigned  to  the  janitor's  rubbish  heap,  where  an  early  sale  or  destruc- 
tion impends. 

To  avoid  this  difficulty  the  bank  waste-baskets  should  be  emptied 
as  fast  as  flUed  into  some  safe  corner  in  storage  rooms,  where  they 
should  be  carefully  preserved  for  a  considerable  time.  The  reasons 
for  this  course  are  evident:  It  was  the  middle  of  July;  and,  in  a  final 
examination  of  an  account  rendered  by  a  corresponding  bank,  we 
found  that  we  had  not  given  the  correspondent  due  credit  for  a  check 
remitted  us  the  middle  of  June.  Letters  showed  that  we  had  duly 
received  and  acknowledged  the  check,  but  further  trace  of  it  could 
not  be  found;  and  it  had  never  been  presented  and  collected.  Under 
the  best  of  systems  such  a  thing  will  happen.  The  janitor  was 
summoned.  He  Avas  given  a  description  of  the  missing  paper  and 
directed  to  hunt  for  it  in  his  June  waste-paper.  The  hunt  was  a 
weary  and  dusty  jt^b ;  but  the  check  was  found  in  the  pile,  presented 
and  collected. 

Here  is  a  handy  and  perfectly  practicable  plan  for  caring  for  the 
paper  in  question — a  plan  which  I  have  introduced  into  a  large  bank, 
and  which  has  served  its  purpose  well : 

I'lain  cotton  bags,  of  a  size  sufficient  to  hold  the  contents  of  a  week 
of  waste-paper  baskets,  are  prepared  to  the  number  of  eight.  When 
one  is  filled  with  the  contents  of  a  week's  waste  baskets  it  is  tied. 


COMMONPLACE    CARES.  343 

dated  and  stowed  away.     The  bags  are  thus  filled,  week  after  week, 
till  the  entire  eight  are  all  stowed  away  in  the  order  of  their  dates. 

When  another  bag  is  wanted  for  the  papers  of  the  next  week  that 
which  was  filled  first  and  bears  the  oldest  date  is  emptied  into  a  bin 
and  the  bag  used  again  with  a  newly  dated  tag. 

By  a  continuance  of  this  system  the  waste-paper  of  the  last  two 
m^onths  will  always  be  within  easy  reach,  and  in  consecutive  order, 
each  weekly  accumulation  by  itself  in  one  bagged  division.  Two 
months  is  about  as  long  as  a  large  and  busy  bank  can  hope  to  keep  in^ 
hand  its  waste-paper;  and  if  it  can  do  this  without  getting  it  into  such 
inextricable  confusion  that  the  porters  in  search  of  lost  papers  of 
value  have  to  hunt  through  all  to  be  sure  they  have  examined  a  given 
day,  it  will  be  better  than  many  large  banks  I  am  acquainted  with 
have  so  far  succeeded  in  doing. 

I  will  also  add  a  suggestion,  that  the  contents  of  each  basket  be 
carefully  examined  by  some  one  competent  to  distinguish  valuable 
papers  from  worthless  ones  before  they  are  i)ut  out  of  sight. 

BANK   LOCKS. 
Without  doubt  the  best  that  can  be  used  are  of  the  self-operating 
time-combination  class.     These  are  the  finest  fasteners  for  the  doors  of 
bank  vaults  that  have  so  far  been  invented. 

As  an  illustration  of  the  progress  which  has  been  made  in  the  last 
few  years  in  a  single  direction  in  this  matter  of  material  protection  for 
the  valuables  of  banks,  it  is  interesting  and  important  to  note  that  the 
combination  lock,  wliieh  in  its  earlier  stages  was  comparatively  easily 
made  a  victim  to  Mr.  Yale's  wonderful  micrometer,  has  now  been  so 
improved  and  perfected  as  to  absolutely  defy  the  searches  of  this  httle 
detector. 

Unquestionably,  ingenuity  exercised  in  the  lock-making  direction 
may  in  time  develop  new  types  of  locks  which  will  entirely  eclipse 
anything  in  that  line  now  in  use  and  will  make  those  now  recom- 
mended seem  clumsy  and  antiquated.  We  have,  however,  to  deal 
only  with  the  present.  The  duty  of  every  bank  Manager  is  to  see  that 
the  bank  in  his  charge  is  provided  with  standard  vaults  and  locks  of 
the  period.  In  the  matter  of  caring  for  the  property  of  his  share- 
holders he  is  bound  to  exercise  due  diligence.  In  acting  as  the  custo- 
dian of  special  deposits  and  collateral  that  are  the  property  of  his 
dealer*  the  law  will  hold  liim  liable  for  loss  which  is  the  outcome  of 
neghgence  in  not  providing  proper  protection  in  the  way  of  safe 
vaults,  doors  and  locks.  It  is  not  a  valid  defense  for  a  bank  which 
has  been  entered  by  burglars  to  argue  that  it  has  taken  as  good  care  of 
the  collateral  upon  which  advances  have  been  made  as  of  its  own  special 
securities.  It  will  be  called  upon  to  show  that  it  has  maintained  the 
customary  and  proper  guard  and  that  it  has  not  fallen  into  hasty  and 
careless  ways. 

There  are  a  few  points  relative  to  the  modern  lock — the  combina- 


344  PRACTICAL.   BANKING. 

tion  lock  of  various  patterns  aad  various  degrees  of  merit — which 
should  be  noted. 

The  President  of  a  bank  should  place  a  record  of  all  the  coiubina- 
tions  under  seal  in  the  vaults  of  some  other  bank  or  safe  deposit  company. 

The  doors  of  vaults  which  are  locked  by  combinations  should  have 
double  sets  of  locks  so  that  if  one  set  gets  out  of  order  the  doors  can 
be  opened  by  using  the  other. 

When  combination  locks  are  placed  in  the  hands  of  locksmiths  to 
clean  and  repair,  their  combinations  should  be  changed  when  they  are 
received  back  before  they  are  again  used.  The  following  somewhat 
sensational  statement  taken  from  a  lock-maker's  circular  proves  this  to 
be  a  necessary  precaution : 

In  sEVERAi^  INSTANCES  there  have  been  found  experts,  locksmiths,  and  others  in 
large  towns  who  have  upon  their  memorandum  book  the  combinations  of  all  the  safes 
of  the  principal  business  houses  and  banks  of  that  to^vn  or  city,  and  can  go  at  any  hour 
and  open  them  or  give  information  to  others  who  can  then  do  so. 

Vaults  and  locks  should  be  often  examined,  repaired,  improved  and 
exchanged,  and  every  bank  Cashier  should  remember  one  remarkable 
fact  regarding  the  modern  combination  lock.  If  not  properly  looked 
after,  regularly  and  thoroughly  examined  and  cleaned  it  will  be  liable 
to  shift  and  change  its  combinations  while  being  manipulated  in  the 
regular  manner.  Instances  where  these  locks  have  themselves  changed 
their  combinations  in  this  way  have  come  under  my  notice. 

In  some  banks  a  danger  has  been  allowed  to  creep  in  which  did  not 
often  exist  under  the  old-time  fashion  of  the  key  locks.  Then,  well- 
managed  banks  were  sure  to  arrange  that  the  keys  of  the  inner  and 
outer  doors  should  be  given  into  the  over-night  custody  of  different 
oflBcers;  but  of  late  years  I  have  been  cognizant  of  instances  where 
very  large  banking  institutions,  Avith  combination  locks  upon  their 
most  important  vaults,  have  allowed  one  officer  (the  Cashier)  to  carry 
in  his  head  all  the  combinations,  by  this  arrangement  giving  him  the 
opportunity  to  go  to  the  bank  at  any  time  of  the  day  or  night  and  open 
everything— to  pass  through  the  inner  and  outer  doors  of  all  the  strong 
rooms.  One  great  point  of  danger  in  such  a  lock  arrangement  is  found 
in  the  fact  that  burglars  can  capture  such  officers  and  conduct  them 
alone  to  bank  vaults,  which  they  have  full  power  to  open  without  the 
necessity  of  summoning  others. 

The  large  diamond  and  jewelry  dealers  of  London  can  teach  such 
banks  a  profitable  lesson  in  the  locking-up  business.  I  hav^e  been 
observant  of  instances  in  London  where  dealers  of  the  class  I  have 
named  have  seveii-inan  vaults.  That  is,  they  had  strong  rooms  which 
it  took  seven  men  to  open.  One  of  the  men  had  the  master-key  of 
which  the  other  six  had  a  part.  The  doors  could  neither  be  locked  nor 
unlocked  without  the  presence  of  the  seven  persons.  Every  night  a 
pass-word  was  given  out,  and  the  wards  of  the  lock  were  arranged 
according  to  the  pass-word. 

There  was  a  time  within  the  remembrance  of  most  experienced 


COMMONPLACE    CARES.  345 

bankers,  when  the  vaults  of  all  the  banks  of  the  period  were  locked 
witli  keys  of  cumbrous  size,  and  many  were  used  to  a  single  door.  In 
the  best  arranged  old-fashioned  banks  there  were  at  least  two  huge 
iron  doors  to  each  vault  and  at  least  two  sets  of  locks  and  keys  to  each 
door.  A  portion  of  the  keys  to  each  vault  were  generally  taken  home 
by  the  Cashier  when  the  business  of  the  day  was  done,  and  another 
portion — the  complement  of  the  first — were  taken  by  the  Messenger  to 
the  house  of  the  President  and  by  him  put  in  a  safe  place. 

In  some  banks,  where  the  work  extended  far  into  the  night — notably 
the  case  with  the  Suffolk  Bank  at  its  busiest  season  during  the  famous 
redemption  period — the  Presidents  had  to  sit  up  late  at  night  waiting 
for  the  Messengers  to  come  with  the  trunk  of  keys,  for  there  were  so 
many  and  such  heavy  keys  in  use  by  every  bank  that  they  had  to  be 
carried  in  small  boxes  specially  made  for  them. 

No  single  officer  of  any  bank  should  be  the  custodian  of  the  entire 
set  of  combinations  to  a  vault.     It  is  unsafe  for  both  bank  and  officer. 

BANK    "WATCHMEN. 

The  best  bank  watchman  is  the  best  vault,  safe,  strong  room,  or 
whatever  the  safe  deposit  place  of  the  bank  may  be  termed,  that  can 
be  constiTieted  within  the  means  at  the  disposal  of  the  bank  for  setting 
up  this  part  of  its  banking  machinery. 

In  the  matter  of  selecting  locks,  safes,  vaults,  etc. ,  get  the  best,  for 
the  best  is  none  too  good.  And  the  next  agent  of  a  standard  man- 
ufacturer of  articles  in  this  line  that  comes  along  will  not  hesitate  a 
moment  to  say  what  is  the  best. 

I  have  not  the  time  nor  the  inclination  to  enter  into  any  close 
discussion  of  the  merits  and  demerits  of  the  various  styles  of  locks  and 
vaults  wliich  are  being  pressed  upon  the  attention  of  bank  Managers. 
Every  intelligent  banker  should  study  into  this  matter  for  himself, 
and  not  rest  till  he  feels  confident  that  his  bank  is  well  fortified  in 
point  of  safe,  vault,  and  lock  appliances.  Common  sense,  general 
intelligence,  and  the  average  of  acquaintance  with  mechanics,  are  all 
that  is  needed  to  enable  a  banker  to  decide  for  himself  in  the  premises 
in  question.  There  have  been  the  most  marked  improvements  made 
in  the  construction  of  sitrong  rooms  during  the  last  ten  or  fifteen  years, 
and  all  the  methods  and  ideas  relative  to  this  sort  of  work  are  matters 
of  public  information. 

The  vaults  of  the  Bank  of  England,  the  wonderful  fortifications  of 
the  National  Safe  Deposit  Company  of  London,  and  the  spacious  strong 
rooms  of  the  banks  of  that  city  are,  perhaps,  as  good  models  of  work 
of  this  sort  as  can  be  found  in  the  world;  yet  I  found  their  Managers 
ready  to  show  tliem  to  enquiring  strangers,  and  I  saw  in  London  papers 
explanations,  which  I  preserved,  giving  the  most  detailed  accounts 
of  the  way  some  of  the  last  and  best  of  the  strong  rooms  were  con- 
structed. 

But  give  a  burglar  time  enough  and  he  can  get  into  any  of  these 


346  PRACTICAL    BAXKI^'G. 

strongholds.  What  honest  mechanics  have  builded  dishonest  mecliauies 
can  batter  do\vii,  or  grind  into,  if  time  enough  is  given  them. 

Every  bank  that  can  do  so,  should  have  private  watchmen  sleepmg 
at  the  door  of  their  treasures,  and  should  avail  themselves,  also,  of  all 
the  modern  electric  burglar  alarm  safeguards.  The  bank  which  does 
not  keep  alive  in  this  matter  of  mechanical,  and  every  other  sort  of 
protection  for  the  property  of  its  shareholders  and  customers,  assumes 
an  unwarrantable  responsibility — will  find  itself  open  to  direct  censure 
if  troubles  come  through  its  carelessness  in  this  matter. 

It  has  sometimes  been  urged,  as  an  argument  against  the  employment 
of  watchmen,  that  it  is  not  right  to  put  men  in  such  hazardous  positions, 
simply  for  the  protection  and  preservation  of  material  property.  It  is 
in  view  of  such  an  argument  as  this  that  some  bank  Managers,  who 
have  laelieved  that  there  was  nothing  that  could  take  the  place  of  a 
good  watchman  in  a  bank,  have  used  the  most  careful  means  to  secure 
his  personal  safety  while  on  his  lonely  vigils.  Here  is  an  instance 
illustrating  this  point :  One  bank  has  had  its  vaults  so  constructed  that 
they  rise  like  a  round  tower  through  the  center  of  their  banking  rooms, 
and  are  thus  open  to  inspection  on  all  sides.  The  night  watchman 
ascends  from  the  banking  room  by  a  ladder  to  a  secluded  and  well- 
protected  room  above  the  banking  rooms  and  vault  doors,  and  pulls 
his  ladder  up  after  hiiu.  from  which  point  of  vantage  he  can,  in  case  of 
need,  look  down  and  shoot  down,  and  raise  alarms  through  electric 
connection  with  the  police. 

Another  bank,  with  the  same  humane  end  in  view,  has  placed  about 
their  watchman  the  strongest  iron  doors  and  shutters,  which  are  only 
visible  and  only  in  use  after  the  watchman  has  taken  up  his  quarters 
for  the  night,  at  which  time  they  are  closed  over  the  ordinary  doors 
and  windows. 

The  most  vulnerable  point  about  watchmen  as  an  institution,  and, 
therefore,  the  most  serious  objection  that  can  be  urged  against  their 
employment  is,  that  unfaithful  men  in  such  positions  are  a  great  source 
of  danger,  since  the  valuable  information  their  situation  necessarily 
gives  them,  and  the  vantage  ground  of  their  position,  may  work  the 
ruin  of  everything,  if  they  yield  to  temptation  and  league  and  collude 
with  outside  rogues.  Instances  of  this  character,  and  very  notable 
ones,  have  unfortunately  been  too  common. 

But  all  this  only  emphasizes  the  necessity  for  the  exercise  of  the 
extremest  care  in  the  selection  of  your  men  for  these  delicate  positions. 

HOW  LONG  SHALL  A  BANK  KEEP  ITS  OLD  BOOKS  AND  PAPERS? 
There  has  been  no  attempt  to  solve  this  question  in  any  quarter  of 
this  country.  We  have  not  been  in  the  banking  business  long  enough 
to  demand  its  solution.  On  the  other  side  of  tiie  water,  for  instance, 
in  a  certain  bank  in  the  South  of  Europe,  that  a  friend  of  mine  visited 
recently,  which  had  been  making  discounts  and  paying  checks  on 
the  same  spot  for  500  years,  provision  must  be  made  once  in.  say,  a 


COMMONPLACE    CA.RES.  347 

hundred  years  or  so,  for  clearing  out  old  stocks  of  books  and  vouchers 
by  making  a  bonfire  of  them  or  turning  them  into  paper  stock.  But, 
in  our  comparatively  new  country,  we  have,  in  this  matter,  simply 
drifted  along,  generally  keeping  everything  in  the  way  of  old  bank 
records  and  vouchers,  not  daring  to  destroy  any  of  them  for  fear  they 
might  be  wanted  the  next  day  after  their  destruction,  yet  really  glad 
when  some  great  fire  has  come  along  and  settled  matters  for  us  by  very 
conveniently  burning  up  the  whole  of  the  dusty  and  mouldy  rubbish. 
Bankers  often  say  that  such  great  fires  really  ought  to  sweep  over  us 
once  in  awiiile  in  order  to  cleanse  us  of  our  worthless  things. 

In  some  States  laws  have  been  passed,  limiting  the  time  in  which 
banks,  etc.,  are  obhged  to  keep  their  old  records  and  vouchers.  And, 
in  such  States,  bankers  have,  to  my  knowledge,  swept  their  attics  with 
considerable  promptness  and  courage. 

During  the  war  of  the  rebellion,  many  banks  took  advantage  of  the 
extreme  scarcity  and  high  price  of  paper  stock  to  sell  their  attic  supplies 
of  books,  etc.  etc.,  and  I  have  never  heard  of  any  outcome  of  trouble 
from  this  clearing  up. 

But  there  are  to-day  many  old  banks,  especially  in  our  large  Clt'aring- 
House  cities,  that  have,  or  say  they  have,  every  book  and  paper  which 
has  been  in  use  and  seen  its  day  since  the  bank  began  to  live. 

We  may  say  quite  positively  that  there  is  little  need  of  keeping 
subsidiary  books — Paying  and  Receivmg-TeUer's  books  for  instance — 
a  very  great  length  of  time.  Neither  are  old  paid  checks  or  stubs  of 
check-books  of  great  permanent  value.  All  in  them  and  on  them  of 
importance  can  be  found  in  the  principal  books  of  the  bank,  and  these 
should  never  be  destroyed.  They  should  be  carefully  preserved  in 
such  order  as  to  be  readily  accessible  in  case  of  sudden  call,  and  not  in 
a  confused  and  promiscuous  heap  in  some  hardly  accessible  attic. 

I  found  that  the  Bank  of  England  had  a  rule  about  keeping  vouchers, 
etc.  All  its  cancelled  notes  are,  for  instance,  filed  away  and  kept  until 
they  get  brown  with  age — say  20  years — and  are  then  cast  into  the  fire. 

The  United  States  Government  has  never  voluntarily  destroyed  a 
smgle  voucher,  as  one  of  my  correspondents  can  testify,  who  has  had 
to  dig  in  the  archives  of  the  Washington  departments,  in  search  of 
material  for  a  phase  of  United  States  financial  history.  Accident  and 
fire  have  destroyed  some  of  these  old  Government  papers. 

The  discussion  of  this  question  of  keeping  old  bank  books  and 
papers  leads  me  directly  to  the  consideration  of  an  important  collateral 
question,  wliich  is : 

"WHAT  VOUCHERS  SHALL  BE  RETURNED  BY  BANKS  TO  DEALERS? 

A  bank  expects  to  return  of  course,  to  promisors  and  acceptors, 
all  the  paper  which  it  has  collected. 

When  a  party  pays  his  note,  or  a  draft  which  has  been  drawn 
upon  him,  he  intends,  generally,  to  receive,  in  exchange  for  his 
money,  the  cancelled  voucher.     But  it  is  a  curious  fact  that  very 


348  TKACTICAL    BANKING. 

many  payers  of  notes  at  banks  deliberately  go  away  without  taking 
up  the  notes— simply  pass  in  their  cash,  wait  to  see  if  it  is  right, 
and  then  hasten  away,  leaving  vouchers  with  the  Teller.  The  Teller 
calls  after  them  to  stop  and  take  the  cashed  paper;  but,  in  large  city 
banks,  Avhere  such  incidents  often  happen,  many  escape  him.  and 
leave  their  notes  on  liis  hands— notes  which,  in  some  cases,  he  may 
hardly  know  what  to  do  \vith,  since  he  may  not  have  the  makers'  address. 

The  Teller  of  an  old  city  bank,  wliich  has  always  done  a  heavy 
collection  business,  showed  me,  the  other  day,  quite  a  file  of  paid 
paper  which  had,  in  a  long  series  of  years,  accumulated  on  his  hands 
m  the  way  I  have  described. 

It  is  a  general  custom  for  banks  to  return  paid  checks  to  dealers 
who  have  dra\vn  them— to  return  them,  cancelled,  ^uth  the  balanced 
pass-books  at  the  close  of  each  month.     This  practice  is  not  universal. 

I  know  of  a  large,  old,  and  well-managed  city  bank  which  never 
gives  up  these  check  vouchers;  and  I  doubt  not  there  are  others 
which  do  the  same.  The  bank  in  question  has  furnished  me  its 
reasons  for  holding  on  to  the  paid  checks — reasons  which  are  certainly 
A^ery  logical.  These  checks,  they  say,  are  its  only  vouchers  for  money 
paid  and  charged  depositors— its  only  receipts — and  why  should  they 
be  returned  ?  If  one  of  these  check-drawers  gives  an  order  on  the 
bank  for  the  delivery  of  a  note  left  with  it  for  collection,  the  order  is 
carefully  filed  away  by  the  bank.  And  why  should  an  order  for  the 
payment  of  the  dealer's  money  be  treated  differently  ? 

It  has  never  been  the  general  custom  for  banks  keeping  accounts 
with  other  banks  to  return  to  the  banking  correspondents  their  paid 
checks,  though  why  individual  checks  are  returned  and  bank  checks 
retained  is  not  easily  explainable. 

Of  late  years  many  of  the  banks  in  large  cities — reserve  cities,  etc., 
— have  adopted  the  practice  of  sending  home,  by  mail  or  express,  once 
a  month,  all  the  cheeks  paid  for  account  of  their  interior  correspondents. 
I  have  believed  that  they  have  done  this  because  they  wished  to  get 
rid  of  vast  masses  of  useless  vouchers,  which  they  did  not  dare  to 
destroy,  and  had  little  room  to  store. 

Some  banks,  in  delivering  individual  checks,  take  a  depositor's 
receipt  for  the  same.     Banks  returning  bank-checks  always  do  this. 

1  have  heard  it  urged  quite  fi-equently  that  depositors  wish  their 
checks  back  because  they  are  often  the  only  receipts  they  get  for  bills 
paid,  the  payee's  endorsements  being  those  receipts.  But.  in  a  sys- 
tematic metliod  of  doing  business,  depositors  should  have  other  receipts. 

Referring  to  the  matter  of  keeping  old  papers  in  connection  with 
this  check  business,  it  may  well  be  suggested  that  the  banks  are  not 
called  upon  to  keep  paid  checks  very  long,  since  depositors  quite 
generally  destroy  them  as  soon  as  they  get  hold  of  them. 


THE    CLEARIN&  -  HOUSE    SYSTEM.  349 


CHAPTER   XXIII. 

THE    CLEARING-HOUSE    SYSTEM. 

This  is  one  of  the  modern  sliort-hand  j)rocesses  in  banking  wliich 
few  students  of  finance  outside  of  banking  circles  seem  clearly  to 
understand.  There  is  notliing  intricate  or  mystifying  in  this  quick 
method  of  making  bank  settlements.  The  circle  of  banks  associated 
in  any  settling  arrangement  of  this  class  simply  agrees  to  make  a  con- 
junction tlirough  representatives — Messengers  and  Settling-Clerks — 
and  at  the  place  of  meeting  effect  those  exchanges  which,  in  ante- 
Clearing-House  days  were  made  by  the  slow  and  wearisome  methods 
of  the  old-fashioned  familiar  type.  This  old  method  demanded  that 
every  bank  having  claims  upon  other  banks  should  send  out  Messen- 
gers to  collect  the  same  over  the  counters,  and  that  all  banks  having 
payments  to  make  to  other  banks  sliould  by  their  representatives  make 
special  trips  to  the  creditor  banks  to  cancel  the  obhgations.  There  was 
much  weary  traveling  for  the  Messengers,  a  great  amount  of  paying 
and  receiving  by  the  Tellers,  and  much  incidental  risk  from  exposure 
of  funds,  all  of  which  has,  to  a  very  great  extent,  been  done  away 
with  by  the  institution  of  Clearing-Houses. 

A  bank  Clearing-House  is  about  the  same  the  world  over.  We 
have  copied  the  clearing  idea  from  London,  where  I  found  its  methods 
and  machinery  almost  identical  witli  those  of  New  York,  Boston  and 
other  cities. 

We  have  not  been  using  the  system  long. 

In  Europe  the  Clearing-House  system  has  been  in  vogue  for  fully  a 
hundred  years  or  so. 

An  explanation  of  the  details  of  the  Clearing-House  business  may 
be  made  plain  by  taking  the  reader  of  this  volume  directly  into  a 
Clearing-House  city,  not  having  too  large  a  number  of  banks  in  its 
settlement  circle,  and  carrying  him  tlii'ough  a  morning's  settlement 
by  going  into  both  banks  and  Clearing-House,  showing  him  how  the 
banks  prepare  for  the  clearings  and  how  the  Clearing-House  effects 
them — introducing  incidentally  all  the  leading  forms  in  use  by  both 
banks  and  Clearing-House.  The  first  important  form  (see  Form  79 
on  page  350)  is  a  "sheet"  supposed  to  be  made  up  by  the  "Nat. 
Security,"  or  No.  46: 

The  banks  of  this  clearing  city  are,  for  convenience,  all  numbered. 
The  figures  to  the  extreme  left  are  their  numbers,  and  against  the 
numbers  are   their  names.     The  arrangement  of  the  order  of  their 


350 


PRACTICAL    BAXKIXG. 


numbers  and  names  is  in  accordance  with  the  age  of  the  institutions. 
The  "First  Debit"  column  of  figures  represents  tlie  amounts  of  cash, 


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Fonu  79. 


THE   CLEARING-HOUSE    SYSTEM. 


351 


cheeks,  etc.,  which  the  bank  holds — and  has  made  up  before  the  early 
morning  receipts — against  the  banks  against  which  the  sums  are  set. 
"Additions"  are  the  later  receipts  of  demands  against  these  same 
banks.  "Total  Debit  "the  sum  of  "First  Debit"  and  "Additions," 
— these  three  columns  are  made  up  at  the  bank  before  starting  for  the 
Clearing-House. 

The  fourth  column  of  "  Banks  Credit "  records  the  sums  which  each 
of  the  other  banks  brought  into  the  clearing  against  the  Nat.  Security, 
and  its  total  is  of  course  the  aggregate  of  the  demands  of  each  of  its 
clearing  neighbors.  The  difference  between  the  foot  of  these  two 
columns  is  the  gain  or  loss  which  has  been  the  outcome  of  the  morning's 
settlement.  In  this  ease  I  have  given  a  sheet  where  the  morning's 
clearing  gain  was  $69,900.82. 

That  is,  all  the  banks  of  the  Clearing-House  brought  in  and  delivered 
to  the  Security  checks  against  itself  amounting  to  $69,900.83  less  than 
the  cheeks  on  the  other  banks  which  the  Security  took  to  clearing  and 
delivered  to  them,  and  the  Security  is,  therefore,  entitled  to  a  cash 
payment  from  the  Clearing-House  of  that  amount. 

I  have  said  that  tlie  sheet  is  mainly  made  up  at  the  bank. 

As  the  Clearing-House  session  begins  promptly  at  10  o'clock  it  is 
necessary  for  a  Settling  Clerk  to  be  at  the  bank  some  time  before  that 
hour  in  order  to  properly  prepare  his  statement.  The  preparation  of 
this  sheet  is  conducted  differently  in  banks,  but  an  ordinary  method  is 
to  make  the  first  debit  entries  from  the  record  on  the  Teller's  book 
where  the  checks  have  been  hsted  against  each  bank  and  footed  as  a 
part  of  the  previous  day's  work.  These  checks  have  also  been  assorted 
and  perhaps  listed  on  the  ' '  Exchange  Slip  "  (see  Form  80)  as  well. 


EXCHANGE    SLIP. 

IsO.  26, 
ELIOT    NATIONAL, 

From  No.  46,  NaL  Security  Bank 

6 

-5 

CO 

O 

-5 
so 

O       e^       - 

ec 

O 
O 

O 

— 

— 

<5l 

Form  80. 

Then  come  the  checks  received  in  the  morning's  mail  or  by  early 
deposit,  and  of  these  a  supplementary  entry  is  made  against  each  bank 
and  on  the  slips,  and  the  amount  of  the  additions  in  each  case  is 


353 


PRACTICAL  BAXKIXG. 


carried  into  tlie  second  column  and  a  total  extended  into  the  third 
column  of  the  sheet  and  a  final  footing  made.  The  checks  on  each  bank 
are  then  pinned  up  with  tlie  proper  Exchange  Slip  (see  Form  80) ;  the 
footing  of  the  slips  compared  with  the  entry  on  the  sheet,  and  the 
packages  put  in  numerical  order  for  delivery  at  the  Clearing-House. 
The  next  thing  to  do  is  to  make  out  the  cheek  tickets  (see  Form 
81)  which  are  to  be  delivered  to  the  other  banks  with  the  packages. 

No.  26,  I 

ELIOT    IvTATlO^AL    BAXK, 

FROM 

aOlfS- Dollars. $U..— Cents. 


This  morning  preparation  for  the  clearing  is  one  of  the  busiest 
periods  of  the  day — both  the  Tellers  and  their  clerks  and  probably 
assistants  from  other  departments  put  in  the  best  work  they  are 
capable  of — there  is  never  any  time  to  spare;  and  the  bank  whose 
clerks  never  have  to  run  in  order  to  reach  the  Clearing-House  in  time 
to  avoid  a  fine  is  a  marvel  of  good  management.  Each  bank  sends  to 
clearing  a  Settling  Clerk,  in  charge  of  its  sheet  and  to  receive  pack- 
ages, and  a  Messenger  to  carry  and  deliver  its  packages. 

When  the  Settling  Clerk  enters  the  Clearing-House  and  passes  to 
his  place  he  delivers  at  the  Manager's  desk  a  Credit  Ticket  (see  Form 
82)  showing  the  total  amount  he  has  brought  in  from  which  the 
Manager's  Clerk  makes  f,  credit  entry  to  his  account. 

No L^l BOSTON   CLEARING-HOUSE. 

(DxJLoJU^  21^ 18QO 

X^cxJI:.  4j>..cxuJJL^  TBxooJi $5ift,l^5a.^3 


*«>t^**l 

* 

, 

* 

* 

1- 

* 

* 

Ul 

* 

* 

^ 

^ 

* 

* 

O 

* 
* 

* 

H 

* 

* 

* 

* 

^ 

* 

* 

* 

* 

Q 

* 

* 

U 

* 

* 

(K 

* 

* 

O 

:* 
* 

^***)|e 

■y 


.Settling  Clerk. 


Form  82. 

The  Settling  Clerks  take  their  places  in  order  on  the  inside  of  a  long 
counter  each  with  his  own  Messenger  standing  over  against  him  on  the 
outside  of  the  counter. 

The  Manager  strikes  the  bell  at  10  o'clock  and  off  starts  the  whole 
line  of  Messengers  along  the  counter— keeping  their  relative  positions 
and  order  and  deUvering  a  package  and  check  ticket  or  a  blank  to 
each  Settlmg  Clerk  as  they  pass  before  him. 

The  work  of  the  Settling  Clerk  is  to  list  down  in  his  fourth  column 


THE    CLE ARIN^G  -  HOUSE    SYSTEM.  353 

the  amount  of  each  package   as  handed  in  by  the  Messengers  fUing 
before  him. 

In  tliree  or  four  minutes  his  fifty  or  so  packages  are  all  in  and  he  can 
make  a  footing  and  strike  a  balance  as  is  shown  on  the  sheet  above. 
The  next  thing  to  do  is  to  make  out  the  balance  ticket  (see  Form  83), 
showing  the  figures  as  they  are  on  the  sheet. 

No      vt  BOSTON   CLEARING-HOUSE. 

Dr X.oJt.cX»-^xLA-;Ji^l5^.oooJi Am't  Rec'd $lf']U55a.O  1 - 

Cr "  "  "       Am't   Bro't $5lfL>,If5a.^S_ 

Balance  $  ,  due  Clearing-House. 

Balance  due  the  XoJ^.  '2^jLj<Lj^juy^JLu  l^^o^^k $L.Q,Q00.^2.- 

<Wjo^_(la Settling  Clerk. 


Form  83. 

This  is  to  be  handed  to  the  clerk  at  the  Manager's  desk,  but  before 
doing  so  the  Settling  Clerk  will  assort  the  cheek  tickets  which  have 
been  put  by  the  different  Messengers  into  a  receptacle  on  his  desk,  and 
by  them  check  ofE  the  hurried  entries  which  he  made  from  the  pack- 
ages themselves.  When  satisfied  that  his  work  is  right  he  sends  up 
his  balance  ticket  and  from  these  tickets  the  Manager's  clerk  completes 
his  sheet  and  makes  the  final  footings  which  prove  all  the  work. 

The  bank  Settling  Clerks  have  from  10  o'clock  to  10.30  to  make 
their  settlement. 

It  generally  takes  from  five  to  ten  minutes  by  the  clock  for  the 
Manager's  clerk  to  make  his  settlement,  and,  if  his  sheet  proves,  the 
work  of  the  morning  is  ended  and  the  clerks  may  go  home.  If  an  error 
is  shown  to  be  in  some  of  the  sheets  they  must  be  gone  over  again ;  the 
clerk  having  the  error  must  send  up  a  corrected  balance  ticket,  and  is 
fined  §2  for  every  fifteen  minutes  after  10.30  that  it  takes  to  find  the 
error. 

The  banks  which  have  lost  at  the  clearing  must  pay  the  amount  of 
their  several  losses  to  the  Clearing-House  before  12.15  o'clock.  In  the 
large  cities  they  must  pay  funds  such  as  are  proper  to  be  held  as  reserve 
by  the  banks. 

In  some  other  places  the  bank's  checks  on  Boston  or  New  York  are 
used  as  Clearing-House  funds. 

These  funds  are  aU  received  by  the  Clearing-House  Manager  and 
his  clerks;  counted,  and  made  up  in  proper  form  to  be  paid  out  at 
1.30  o'clock  to  those  banks  which  gained  at  that  morning's  clearing. 
Of  course  the  losses  and  the  gains  will  in  their  totals  exactly  balance 


554 


PRACTICAL    BAIfKING. 


each  other  and  the  Cleariiig-House  after  handling  its  millions  through 
the  day  closes  at  two  o'clock  without  a  penny  in  the  till. 

In  paying  and  receiving  these  losses  and  gains  considerable  work  and 
risk  in  the  way  of  actual  transfer  of  cash  is  saved  by  the  use  of 
Clearing-House  ordepe,  which  may  be  said  to  pass  as  cash  between  the 
settling  banks,  and  which  are  received  and  debited  or  credited  as  such 
by  the  Clearing-House  Manager.  Here  is  one  of  these  orders  (see 
Form  84.) 


$VS.<^00 BOSTON €).c±xiJU^   2.0 IScjO 

Transfer  to  the  Credit  of ^ivj»_j  <3-h.<x_xLfi_A^'  Xux±.  iT^^ooosX 

rrrrrr7rr-77-r:rr'--r-7r~-rT<jAAjtLu,-JlivA-a_ii.)  <3i>ukJixA-><x.A^^Tr---?r---r-~r-rrrTr7dollarS, 

And  charge  the  same  in  Settlement  of  the  balance  due  to 

..^JL^     XoJt.      lB,OLJUsX    JOJL     XJLsu,     IfLsLkjuJJj^ 

To  N.  G.  SHELLING, 


Manager. 


.3C.  35.  cdf-xL^JLiL^ --Cashier. 


Form  84. 
CLEARING-HOUSE    MANAGEMENT. 

Such  a  vast  amount  of  exchange  business  and  comphcated  clerical 
work  is  transacted  in  a  very  short  time  at  the  daily  morning  settle- 
ments of  the  Clearing-House,  that  it  is  very  important  that  the 
representatives  of  the  banks — two  from  each — who  do  the  work  in 
question  should  be  careful,  accurate  and  capable  of  perforuaing  con- 
siderable clerical  labor.  They  must  give  their  undivided  attention  to 
their  business  and  should  not  indulge  in  idle  talk  or  unbusiness-like 
behavior,  as  the  sUghtest  error  on  the  part  of  one  clerk  may  prolong 
indefinitely  the  entire  settlement. 

In  view  of  these  facts  Clearing-IIouses  have  inserted  in  their  by-laws 
what  may  be  termed  rigid  police  rules. 

The  following  extracts  taken  from  the  by-laws  of  one  of  the 
best-managed  Clearing-Houses  in  the  United  States  will  give  a  good 
idea  of  what  they  are : 

1.  For  disorderly  conduct  of  any  Clerk,  or  other  officer,  at  the  Clearing-IIouse,  or 
disniKard  of  the  Manager's  rules  and  instructions,  for  each  offen.so,  $4.00. 

2.  For  any  officer  failing  to  attend  punctually  at  the  hour  for  making  the 
exchanges,  $4.00. 

3.  Debtor  banks,  failing  to  appear  to  pay  their  balances  before  a  quarter  past  12 
o'clock,  $;3.00. 

4.  Any  error  in  the  Credit  Ticket  (that  is  the  amount  brought),  |Q.OO. 

5.  Errors  in  making  the  Balance  Ticket  ( that  is,  the  amount  received)  entries  $2.00. 

6.  Failing  to  deliver  Check  llckcts  before  half-past  ten  o'clock,  11.00. 

7.  All  other  errors,  $2.00. 

Any  Clerk,  or  other  officer,  who  shall  repeatedly  and  pcrsoveringly  disobey  the 
orders  or  instructions  of  the  Manager,  shall,  with  the  approbation  of  the  Clearing- 


THE    CLEARING-HOUSE    SYSTEM.  355 

House  Committee,  be  expelled,  iuid  not  re-admitted  without  the  written  consent  of 
the  Committee. 

i^W  Thirty  minutes  will  be  allowed  for  the  mornint?  business  of  settlement,  and 
for  each  additional  lifteeu  minutes'  detention,  .'?2  will  be  added  to  the  fine  under  No.  5. 

Below  are  a  few  important  point.s  from  the  general  rules  of  the 
same  Clearing-House  which  vary  but  little  from  those  of  other  Clearing- 
Houses  throughout  the  country  : 

Errors  in  the  exchanges  and  claims  arising  from  the  returns  of  checks  or  other 
cause  are  to  be  adjusted  directly  between  the  banks  which  are  parties  therein,  and 
not  through  the  Cleariug-IIouse. 

Whenever  checks  which  are  not  good  are  sent  through  the  Clearing-House  they 
shall  be  returned  by  the  banks  recei\'ing  tlie  same  to  the  banks  from  which  they  were 
received  as  soon  as  it  shall  be  found  that  said  checks  are  not  good  ;  and  in  no  case 
shall  they  be  retained  after  one  o'clock. 

The  Manager  shall  immediately  report  to  the  Clearing-House  Committee  any 
apparent  irregularity  in  the  dealings  of  any  bank  belonging  to  the  Association  that 
comes  to  his  notice,  and  receive  the  instructions  of  the  Committee  in  regard  thereto. 

The  Committee  shall  have  power  to  remove  the  Manager  or  any  of  the  Clerks, 
whenever,  in  their  opinion,  the  interests  of  the  Association  shall  require  it. 

The  hour  for  making  the  exchanges  at  the  Clearing-House  shall  be  ten  o'clock 
A.M.  each  day.  At  a  quarter  past  twelve  o'clock,  noon,  the  debtor  banks  shall  pay  to 
the  Manager,  at  the  Clearing-House,  the  balances  due  from  them  respectively  either 
in  coin  or  in  such  other  currency  as  the  laws  of  the  United  States  shall  require,  or  in 
such  certificates  as  shall  be  authorized  by  the  Clearing-House  Association,  excepting 
sums  less  than  one  thousand  dollars,  which  may  be  paid  in  bills  of  the  debtor  bank. 

At  half-past  one  o'clock  P.M.  the  creditor  banks  shall  receive  from  the  Manager, 
at  the  same  place  the  balances  due  to  them  respectively  ;  provided  all  the  balances 
due  from  the  debtor  banks  shall  then  have  been  paid  to  him. 

Should  any  bank  fail  to  pay  the  balance  due  from  it  at  the  proper  hour  the 
amount  of  such  balance  shall  be  immediately  furnished  to  the  Clearing-House  by  the 
several  other  banks  in  proportion  to  their  respective  balances  against  the  defaulting 
bank  resulting  from  the  exchanges  of  that  day. 

The  clerks  and  Messengers  who  represent  the  banks  at  the  Clearing- 
House  should  be  extremely  prompt  in  presenting  themselves  at  the  set 
time.     Punctuality  in  this  regard  means  about  five  minutes  before  time. 

Banks  should  see  that  no  officers  are  sent  for  Clearing-House  ser- 
vice, particularly  in  the  capacity  of  Settling  Clerks,  who  have  not 
natural  fitness  for  their  work.  An  incompetent  or  careless  officer 
among  so  many  men  will  set  back  all  the  work  in  hand. 

In  passing  to  and  from  the  Clearing-House  bearing  the  checks  and 
cash  which  are  a  bank's  balances  (the  grists  which  run  through  the 
mill),  Messengers  should  be  extremely  careful  of  the  valuables  which 
are  of  necessity  entrusted  to  them  to  carry  through  the  streets. 

LOANS  BETWEEN  BANKS  AT  CLEARING. 
In  some  of  our  Clearing-House  cities,  notably  in  Boston,  the  banks 
are  in  the  habit  of  borrowing  of  each  other,  as  their  situation  may 
demand,  immediately  after  they  have  made  their  morning  settlements. 
These  negotiations  are,  of  necessity,  made  by  the  representatives  of 
the  banks  who  are  present  at  the  clearing.  And  these  representa- 
tives are  mainly  the  Messengers  and  Settling  Clerks  of  the  banks. 


336  PRACTICAL    BANKING. 

though  it  has  of  late  years  become  the  custom  with  many  banks  to  be 
present  at  these  morning  after-clearing  negotiations  in  the  person  of 
their  Cashier. 

This  custom  has  been  in  existence  for  at  least  20  years,  and  the 
aggregate  of  loans  of  this  class  made  there  daily  is  very  large — ranging 
from  hundreds  of  thousands  to  millions  of  dollars.  I  have  known 
many  instances  where  banks,  which  have  emerged  from  the  morning 
settlements  with  gains  of  more  than  a  million,  have,  before  leaving  the 
Clearing-House,  scattered  these  entire  gains  in  loans  among  losing  banks 
— loans  negotiated  on  both  sides  by  single  representatives  of  the  banks, 
and  those  often  junior  clerks.  There  is  nothing  of  this  sort  done  in  the 
European  Clearing-Houses. 

I  found  the  London  bankers  interested  and  astonished  to  hear  that 
we  Indulged  in  financial  transactions  of  this  character. 

The  loans  made  at  clearing  are  loans  of  minute  money.  They  are 
rarely  secured  by  deposit  of  collateral  of  any  sort. 

The  bank  receiving  the  accommodation  draws  upon  the  lending 
bank  a  check  in  its  usual  form.  The  loan  is  charged  to  it ;  and,  when 
it  is  repaid,  the  lending  bank  settles  the  transaction  by  simply  drawing 
upon  the  debtor  bank  for  the  amount. 

The  current  rates  for  these  loans  are  usually  about  one  per  cent, 
under  those  charged  upon  standard  call  loans  to  private  bankers  and 
merchants.  This  is  because  they  are  loans  for  large  round  sums, 
rangmg  say  from  ten  thousand  to  hundreds  of  thousands  of  dollars, 
and  because  the  money  thus  advanced  is  understood  to  be  immediately 
available  in  the  form  of  Clearing-House  funds. 

This  business  of  borrowing  and  lending  between  banks  has,  in 
Boston  particularly,  increased  greatly  within  the  last  twenty  years. 
Many  experienced  bankers  condemn  the  entire  practice,  urging  that 
Boards  of  bank  Directors  were  not  chosen  for  the  purpose  of  managing 
capital  other  than  that  of  the  bank  in  which  they  have  been  put  in 
charge,  and  claiming  that  it  is  all  wrong  that  banks  should,  by  chronic 
borrowing  from  other  banks,  fall  into  the  habit  of  carrying  along  loans 
altogether  beyond  their  ability  to  sustain  were  they  dependent  solely 
upon  their  own  legitimate  resources. 

In  1881,  a  vigorous  attempt  was  made  by  several  of  the  Boston  bank 
Managers  to  break  up  this  banking  method — to  transfer  to  the  offices 
of  the  banks  a  loaning  business  Avhich  had  so  long  been  transacted  by 
their  clerks  at  the  Clearing-I louse.  This  reform  movement  for  awhile 
bid  fair  to  be  successful ;  but  one  by  one  those  who  had  combined 
against  the  practice  broke  ranks,  and  returned  to  the  old  loaning  rut, 
and,  in  the  end,  the  loaning  at  clearing  system  resumed  its  former 
sway. 

But,  whatever  may  be  the  final  conclusion  on  the  main  question  as 
to  making  those  loans  in  this  manner,  there  is  one  point  upon  which 
most  bankers  are  in  full  agreement  and  that  is,  that  there  should  be 


THE    CLEARING-HOUSE    SYSTEM.  357 

some  plan  in  force  by  which  the  rates  of  these  clearing-loans  should  be 
regulated  and  controlled  by  the  mutual  action  and  combination  of  all 
the  banks  in  any  given  clearing  city. 

As  the  business  is  now  running  along,  the  adjustment  of  these  rates 
is  largely  left,  from  day  to  day,  in  the  hands  of  hurried  subordinate  bank 
officers,  acting  away  from  the  bank,  and  without  any  opportunity  for 
direct  consultation  with  its  Managers. 

Within  late  years  another  class  of  Clearing-House  negotiations — 
negotiations  also  left  entirely  in  the  hands  of  the  representatives  of  the 
banks  who  meet  there — has  become  a  regular  thing  in  Boston,  and  of 
large  proportions.  I  refer  to  the  deaUngs  made  in  New  York  funds. 
On  some  days  these  are  bought  and  sold  rapidly  and  in  heavy  blocks. 

The  details  of  the  operations  I  have  been  describing  are  managed 
in  this  way.  The  bank  Messengers  carry  into  clearing  in  their  heads 
or  hands  statements  of  the  way  their  banks  are  standing  in  the  matter 
of  reserve,  supply  of  New  York  funds,  etc.,  and  general  instructions 
how  to  proceed  in  the  business  of  borrowing  or  loaning,  or  buying  New 
York  exchange,  after  they  have  effected  their  settlements — instructions 
which  are  of  course  to  be  dependent  upon  the  results  of  their  settle- 
ments. As  soon  as  these  Settling  Clerks  have  got  at  the  figures  of  their 
gains  or  losses  at  the  clearing,  they  make  haste  to  do  their  best  to  carry 
out  the  instructions  received  at  the  headquarters — to  lend  or  borrow, 
and  to  buy  or  sell  New  Y^'ork — as  the  situation  may  demand. 

Within  a  few  years  many  of  the  Presidents  and  Cashiers  of  Boston 
banks  have  been  in  the  habit  of  going  themselves  to  the  Clearing- 
House,  to  manage  the  negotiations  we  have  been  describing. 
CLEARING-HOUSE    RESPONSIBILITIES. 

National  banks  have  generally  attempted  to  hedge  against  the 
responsibilities  of  the  collecting  business  which  they  transact  when 
associated  together  in  Clearing-House  arrangements.  The  dangers 
and  difficulties  which  arise  under  these  associated  mutual  morning  set- 
tlements are  well  illustrated  in  the  comphcations  that  grew  out  of  the 
sudden  failure  of  the  Metropolitan  National  Bank,  New  York.  An 
earlier  trouble  of  the  same  nature  occurred  in  Boston  at  the  time  of 
the  failure  of  the  Pacific  National  Bank,  to  which  more  particular 
allusion  is  made,  as  it  resulted  in  a  practical  movement  on  the  part  of 
the  Boston  banks  to  protect  themselves  against  similar  dilficulties  in 
the  future. 

The  Pacific  National  Bank  was  not  a  member  of  the  Clearing- 
House  Association.  Sagacious  Boston  bankers  who  had  little  faith 
from  the  first  in  the  management  of  this  unfortunate  concern  decid- 
edly and  successfully  opposed  its  admission  to  the  Clearing-House, 
receiving  very  severe  denunciations  in  many  quarters  for  doing  so. 
But  the  Central  National  Bank,  which  was  intimately  connected  ^vith 
the  Pacific,  was  a  member  of  the  Clearing-House. 

On  the  morning  when  the  Pacific  suspended  the  Central  reeled 


35H  PRACTICAl.   BANKING, 

somewhat  under  tbe  blow,  and  did  not  respond  to  the  Clearing-House 
demands  upon  it  until  some  hours  after  the  time  fixed  for  the  settlement 
of  such  demands.  The  alarmed  banks  which  were  creditors  of  the 
Central  for  large  amounts  of  checks  upon  it  which  they  had  charged 
through  clearing  \n  regular  course  in  the  morning,  in  some  instances 
endeavored  to  recover  the  unsettled  checks,  hoping  to  be  able  to 
return  them  to  their  depositors  or  in  some  way  to  place  themselves  in 
a  better  position  by  obtaining  the  vouchers. 

The  Central  refused  to  give  up  the  checks.  These  they  claimed 
were  good — had  been  drawn  against  existing  balances.  It  was  not  the 
depositors'  balances  which  were  deficient,  it  was  the  bank  itself  which 
was  falling  behind.  The  outcome  of  this  excitement  was  the  adoption 
by  the  Boston  Clearing-House  of  the  following  regulation — an  idea 
proposed  and  formulated  by  the  late  Francis  Jaques,  who  was  at  that 
time  the  able  President  of  the  Webster  National  Bank : 

"  *  *  *  It  being  understood  that  they,  the  said  banks,  receive  checks  and  items 
payable  by  other  banks,  for  collection,  as  agents  only,  and  do  not  hold  themselves 
liable  for  any  loss  or  damage  which  may  accrue  through  the  default  of  any  bank  or 
banks  upon  which  said  checks  and  other  items  may  be  drawn." 

In  this  case  of  the  Central  National,  the  bank  raised  funds  and 
settled  with  the  Clearing-House ;  but  it  has  been  found  necessary  to 
provide  a  method  of  arranging  matters  left  unsettled  after  a  clearing 
bank  has  failed  to  respond  to  the  demands  made  by  the  Manager  of 
the  Clearing-House.  The  Grant  &  Ward  and  Metropolitan  Bank 
collapses,  were  the  last  influences  most  effective  in  placing  the  associated 
banks  upon  a  clear  and  equitable  basis  of  supplementary  settlements 
in  those  cases  where  the  regular  clearings  were  left  unbalanced  by 
positive  defaults.  It  is  now  generally  provided  in  Clearing-House 
articles  of  Association,  that  where  any  bank  fails  to  pay  the  balance 
due  from  it  at  the  proper  hour,  the  amount  of  such  balance  shall  be 
immediately  furnished  to  the  Clearing-House  by  the  several  other 
banks  in  proportion  to  their  respective  balances  against  the  defaulting 
bank  resulting  from  the  exchanges  of  the  day;  and  the  Manager  is 
required  to  make  requisitions  accordingly  so  that  the  general  settlement 
may  be  accomplished  with  as  little  delay  as  possible— the  amount  so 
furnished  to  the  Clearing-House  constituting  claims  on  the  part  of  the 
responding  banks  respectively  agains*^.  the  defaulting  bank.  And  the 
further  provision  is  also  usually  made,  that  either  of  these  responding 
banks  may  cancel  their  exchanges  with  the  defaulting  bank  by  paying 
to  it  the  amount  of  all  checks  and  other  items  received  from  it  through 
the  exchanges  of  the  day,  and  receiving  in  return  all  checks  and  other 
items  delivered  by  that  bank  to  the  defaulting  bank  in  the  said 
morning  exchanges.  In  regard  to  this  latter  mode  of  settling  scores 
it  may  be  noted  that  its  application  is  not  likely  to  be  often  called  for. 
DISHONORED    CHECKS    RETURNED    BY    CLEARING-HOUSE    BANKS. 

In  Clearing-House  cities  checks  charged  into  banks  through  clearing 
are  considered  as  paid,  if  not  returned  to  the  charging  bank  before  a 


THE    CLEARING-- HOUSE    SYSTEM.  359 

certain  hour  named  i:i  the  by-laws  of  the  Clearmg-House  Association 
of  the  place,  which  hour  is  one  some  time  in  advance  of  the  business- 
closing  hour  of  the  banks.  In  Boston  this  settlement-closing  hour  is 
fixed  at  1  o'clock. 

The  second  paragraph  of  my  quotation  from  the  general  rules, 
given  above,  shows  the  form  of  the  rule  covering  this  point ;  but  we 
have  to  admit  that  bankers  and  courts  have  been  found  disagreeing 
in  their  understanding  of  this  requirement,  that  ' '  in  no  case  are  they 
to  be  retained  after  1  o'clock. "  It  is  argued  in  some  quarters,  that  a 
bad  check  started  upon  its  return  before  1  o'clock  from  the  bank  upon 
■which  it  is  drawn,  and  placed  in  the  hands  of  its  Messenger  before  that 
time  to  be  brought  back  with  orders  to  him  to  go  at  once  with  it  to  the 
charging  bank,  is  really  returned  before  1  o'clock  although  it  may  not 
reach  the  other  bank  until  after  that  hour.  On  the  other  hand,  many 
banks  claim  that  a  returned  check  must,  vinder  the  Clearing-House 
by-law  named,  be  actually  delivered  to  the  charging  bank  before  1 
o'clock.  I  am  of  the  opinion  that  the  latter  view  is  the  correct  one 
— it  certainly  is  the  course  wliich  avoids  any  question — yet  readily 
concede  that  the  regulation  in  question  is  capable  of  misconstruction 
and  deserves  to  be  amended. 

It  is  also  my  opinion,  that  a  check  is  not  returned  to  a  bank  before  1 
o'clock  unless  the  bank  to  which  it  is  returned  actually  receives  it 
over  the  counter  before  that  time.  As  long  as  the  check  is  in  the 
hands  of  the  Messenger  it  is  not  returned — it  is  in  the  possession  of  the 
bank  employing  the  Messenger. 

There  is  one  point  relative  to  this  returning  business  to  which 
attention  should  be  called.  Banks  are  required  by  the  Clearing- 
House  rule  named  to  return  checks  as  soon  as  it  is  found  that  they  are 
not  good,  and  should  not  keep  them,  as  they  often  do,  until  the  last 
safe  uxoment  but  return  them  as  early  as  possible. 

A    PERSONAL    EXPERIENCE. 

Right  here  seems  to  be  just  the  place  for  a  bit  of  personal  experience 
which  may  illustrate  some  points  on  handling  "not  good  "  checks. 

The  house  was  failing — in  fact  did  fail  before  2  o'clock  of  the  day  of 
which  I  write — and  has  never  paid  more  than  25  cents  on  the  dollar. 
I  held  one  of  its  checks  for  $5,000,  which  had  been  taken  the  day  before 
in  payment  of  one  of  its  notes,  and  had  sent  it  in  through  the  morning's 
clearing.  Rumors  soon  reached  me  that  the  house  was  in  trouble,  and 
this  rumor  was  confirmed  when,  just  before  1  o'clock,  the  time  when 
clearing-checks  must  be  returned  or  considered  paid,  the  Cashier  of 
the  bank  upon  which  it  was  drawn  called  upon  me  and  asked  for  further 
time  on  it — to  hold  it,  say,  until  2  o'clock,  as  there  was  not  balance 
enough  in  the  bank  to  meet  all  the  checks  of  this  name  that  had  come 
through  the  clearing,  "  There  is  not  balance  enough  just  now,"  said 
the  Cashier,  "  though  there  may  be  before  2  o'clock. "  I  was,  of  course, 
ready  to  give  him  permission  to  hold  as  requested,  for  a  chance  to  get 


360  PRACTICAL    BAXKIXa. 

my  pay  was  better  than  receiving  the  check  bacli  unpaid.  And  tliis 
chance  was  made  the  most  of  by  allowing  the  check  to  remain  with  the 
bank  upon  which  it  was  drawn,  for  while  it  remained  there  uncollected 
it  might  be  :^aid  to  be  steadily  pressing  for  payment,  and,  while  thus 
remaining  presented,  no  checks  from  any  other  quarter  could  step  in 
ahead  and  be  collected.  An  important  point  in  Clearing-House  banking 
is  here  brought  out  which  every  careful  banker  will  observe  and  clearly 
understand. 

As  the  hour  of  2  o'clock  approached,  without  my  hearing  anything 
from  my  suspended  check,  I  called  upon  the  bank  upon  which  it  was 
drawn.  I  found  the  bank  was  still  holding  all  the  checks  that  had 
reached  it  through  the  Clearing-House  that  had  been  drawn  by  the 
house  that  was  in  trouble — holding  them  on  permission  from  the  owners, 
because  the  house  in  question  had  not  balance  sufficient  to  meet  the 
entire  lot. 

And  this  brings  out  another  important  point  in  banking  in  Clearing- 
House  cities : 

First,  there  not  being  balance  enough  to  pay  all  these  clearing 
checks,  the  bank  could  not  pay  any  of  them. 

Second,  while  all  these  checks  remained  in  the  drawee-bank,  pre- 
sented through  clearing,  it  could  not  use  any  portion  of  the  balance 
against  which  they  were  drawn  to  pay  any  check  of  that  drawer,  large 
or  small,  which  might  be  presented  at  the  counter  of  the  bank. 

As  the  hour  of  bank  closing  had  nearly  come  around  without 
bringing  to  the  drawee-bank  any  reinforcement  of  funds  to  meet  the 
suspended  clearing  checks,  it  came  to  the  conclusion  to  send  them 
all  back  unpaid  to  the  several  banks  which  had  charged  them  in, 
who  had  all  given  further  time  on  them,  and  were  now  anxiously 
waiting  to  learn  their  final  fate. 

And  now  the  order  and  method  of  the  return  of  this  large  batch  of 
failed  checks  became  questions  of  the  first  importance.  The  questions 
were  solved  in  the  following  manner — the  only  correct  manner,  and 
the  slightest  divergence  from  which  would  have  thrown  upon  the 
returning  bank  ugly  responsibilities.  The  Messenger  was  summoned. 
The  dishonored  checks  were  handed  to  him,  and  he  was  told  to  take 
them  back  to  the  banks  which  had  charged  them  through  clearing  in 
the  precise  order  and  method  in  which  he  was  accustomed  to  take 
back  unpaid  clearing  checks — swerving  not  a  hair  from  his  accustomed 
routine  movements  Avhen  such  business  was  on  his  hands.  The  result 
was  that  some  banks — those  nearest  to  the  drawee-bank — got  hold  of 
the  suspended  checks  earlier  than  others  more  distant  in  location. 

All  the  bank-owners  of  these  checks  were  now  on  the  qui  vive,  for 
the  failure  had  become  town  talk,  and  there  was  a  rush  by  them  for 
the  intact  balance  which  stood  to  the  credit  of  the  failed  house  at  the 
bank  which  had  sent  bacli  all  the  clearing  checks.  Those  nearest  to 
the  drawn-upon-bank  got  hold  of  their  returned  checks  the  quickest, 


THE    CLEARING  -  HOUSE    SYSTEM.  361 

and  were  therefore  able  to  pi-esent  them  over  the  counter  and  collect 
them  as  long  the  balance  held  out,  leaving  nothing  for  the  later 
presenters.  First  come  first  served.  The  Paying-Teller  could  not 
refuse  to  apply  this  rule  as  the  checks  came  pouring  in  upon  him. 
The  action  of  the  drawee-bank  was  in  accordance  with  law,  custom  and 
common  sense,  and  should  be  followed  by  all  banks  similarly  placed. 

Some  banks  have  argued  that  clearing  checks  drawn  upon  an 
inadequate  balance  should  bo  paid  in  the  order  of  their  dates  as  long 
as  the  balance  holds  out,  the  later-dated  checks  being  the  ones  to  be 
finally  returned  as  not  good  when  the  balance  was  exhausted.  But 
this  is  not  correct  banking.  Other  bankers  have  urged  that  the  inade- 
quate balance  should  be  divided  proportionately  among  the  presented 
clearing  checks.     This  is  also  incorrect  banking. 

COUNTRY    CHECKS    AND   CITY    CLEARINGS. 

In  many  instances  banks  which  are  located  in  the  vicinity  of 
Clearing-House  cities  announce  that  cheeks  drawn  upon  them  will  be 
settled  through  the  clearing  of  the  city  near  them.  In  furtherance  of 
this  plan  they  name  their  city  corresponding  bank  as  their  settling 
agent.  Every  day,  after  the  morning's  clearing,  the  suburban  bank 
presents  itself  in  the  person  of  one  of  its  ofiicers  at  the  bank  which  is 
its  settling  agent  and  runs  over  the  checks  of  its  dealers  which  have 
been  charged  in,  accepting  the  solvent  ones  and  rejecting  those  which 
are  "not  good."  There  is  a  point  with  regard  to  these  dishonored 
drafts  which  is  a  frequent  source  of  annoyance  and  trouble  to  the  city 
banks  which  have  taken  them  for  collection.  Is  the  presentation  of 
the  rejected  checks  through  clearing,  legal  and  solid  enough  for  a  basis 
upon  which  to  rest  a  protest  and  notice  of  dishonor,  or  must  the 
returned  check,  after  having  been  charged  in  and  rejected,  be  again 
presented  in  a  formal  and  regular  manner  at  the  counter  of  the  bank 
upon  which  it  is  drawn?  The  latter  course,  if  necessary,  becomes 
embarrassing,  since  the  drawee  bank  may  be  distant  enough  to  render 
it  ahuost  impossible  to  make  this  required  demand  on  the  day  of  the 
settlement.  It  is  unquestionably  the  safest  course  to  make  this  square 
demand  upon  the  bank ;  yet  the  collecting  bank,  which  has  made  the 
demand  charge  through  clearing  in  full  accordance  with  notices  from 
the  suburban  bank,  would  have  a  strong  case  in  Court  in  defense  of 
its  course.  The  question  would  undoubtedly  largely  turn  upon  the 
character  of  the  notices  issued,  by  the  suburban  bank,  in  setting  up  for 
itself  tills  system  of  paying  its  checks  through  the  city  clearing. 

There  is  another  point  relating  to  checks  upon  suburban  banks 
■which  needs  particular  notice.  Many  dealers  with  these  near-city 
country  banks  have  a  custom  quite  confusing  and  misleading  to  both 
city  banks  and  individual  holders  of  such  checks.  They  print  upon 
the  margin  of  these  cheeks  which  they  draw  upon  their  local  bank  the 
rather  equivocal  statement  that  they  will  be  received  upon  deposit  by 
the  banks  of  their  nearest  clearing  city — a  statement  which  seems  to 


862  PKACTICAL    BAXKIXG. 

carry  with  it  the  idea  that  the  city  bank  will  unhesitatingly  cash  them 
on  presentation,  or  receive  them  on  deposit  on  the  same  footing  with 
regular  city  checks.  The  holders  of  these  checks  are  often  disappointed 
to  find  that  they  jire  only  checks  on  country  banks  which  must  be  run 
through  the  usual  collection  mill  at  a  cost,  in  some  cases,  of  both  time 
and  money. 

DELAYED   MAILS    AND    THE    CLEARING-HOUSE. 

In  places  where  the  Clearing-Houses  do  the  work  of  collecting  checks 
the  question  often  arises:  What  disposition  shall  be  made  of  those 
checks  which  fail  of  reaching  the  banks  in  the  usual  season  owing  to 
mail  delays  ?    This  question  comes  up  in  a  shape  like  this : 

A  bank  in  New  York  sends  to  its  Boston  bank  a  daily  letter,  usually 
containing  checks  on  Boston  banks  to  the  amount  of  many  thousand 
dollars.  This  regular  letter  reaches  the  Boston  bank,  when  the  mails 
are  not  delayed,  early  in  the  morning,  and  in  ample  season  to  have  its 
contents  collected  through  the  10  o'clock  clearing.  A  heavy  snow- 
storm keeps  the  New  York  mail  back,  and  this  letter  reaches  the  Boston 
bank  at  11  o'clock.  Now,  what  is  the  proper  course  of  the  Boston  bank 
under  the  circumstances?  It  should  be  this  :  Its  correspondent  should 
at  once  be  wired  that  their  letter  has  arrived  late,  so  that  they  may 
know  its  contents  have  not  passed  into  the  Boston  clearing  of  that  day. 
Then  the  Boston  bank  should  carefully  look  over  the  contents  of  the 
letter,  and,  if  there  are  in  it  any  checks  of  considerable  size,  they  should 
be  at  once  presented  to  the  banks  upon  which  they  are  di*awn  for 
certification  or  eollec<^ion — presented  by  the  hands  of  Messengers,  the 
same  as  they  would  have  been  in  ante-Clearing-House  days. 

This  is  the  only  sensible  and  safe  course  under  such  circumstances. 
CLEARING-HOUSE    RETURNS. 

Once  a  week — in  Boston  on  every  Monday  morning  and  in  New  York 
on  every  Saturday  morning — the  banks  in  the  Clearing-House  cities 
niake  a  return  of  their  condition,  made  up  at  the  close  of  the  preceding 
day.  This  is  an  average  weekly  return,  based  upon  the  average  of  the 
whole  week's  daily  balances  of  the  various  items  of  loans,  deposits,  etc., 
that  are  returned  in  this  report.  On  page  363  is  an  exact  transcript  of 
such  a  return  (see  Form  85),  as  delivered  to  the  Clearing-House  Manager. 

The  figures  here  brought  together  are,  as  it  were,  culled  fiom  the 
books  of  the  bank,  and  in  their  preparation  short-hand  work  is  made 
of  the  task  of  getting  at  this  summary  by  bringing  into  service  the 
subsidiary  book  of  return  figures  which  I  have  fully  described  in 
anotlu'r  place.  From  the  aggregate  results  of  the  returns  of  these 
individual  bank  statements  a  table  of  the  returns  of  all  its  banks  is 
made  up  by  the  Manager  of  the  Clearing-House  which  shows  at  a 
glance  the  actual  position  of  the  whole  line  of  the  city  banks  at  the 
close  of  the  seven  days  covered  by  the  summary.  In  the  margin  of 
this  return  a  comparison  is  made  between  its  figures  and  those  of  the 


THE    CLEARING-HOUSE    SYSTEM. 


363 


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§ 
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Due  from  Banks 

other  than 
Reserve  Agents. 

1 

Due  from 
Reserve  Agents. 

i 

Due  to  Banks. 

1 

& 

Individual 
Deposits. 

1 

Circulation. 

1 

Loan. 

to 
1 

Capital. 

1 
Form  85. 

364  PRACTICAL    BANKING. 

statement  of  the  preceding  week.  This  table  of  comparisons,  which 
shows  the  gains  and  losses  made  in  reserve,  deposits,  etc. ,  is  scattered 
broadcast  over  the  country  as  an  item  of  no  little  financial  importance. 
When  these  returns  are  wired  abroad  they  fly  about  in  this  shape. 
Here  is  a  spechuen  (see  Form  86),  of  one  of  these  telegraphic  suuunaries 
as  received  and  distributed  by  a  Boston  banking  house : 


NEW  YORK ©xlIxJLl^  a2 18QO 

Loans 3)jlxl^^cx.^jl^ $2,if50,000 

Specie 3>.oc.a^l.o.ajl^ Q  I  0,S00 

Legal-tenders 3!:)ji.-<^A_a..oo6^ l^aS^,700 

Deposits  a)jLxi^vji..oo&-j^ L^,3"]L„000 

Circulation >3^o..'<^>-«-cv-d'-«-j If  I,,  5  O  O 

Reserve 3^o.^^a_jl.o^j^ S^30,^00 

Richardson,   Hill   &  Co. 

Form  86. 


OUR   ENGLISH   COUSINS.  365 


CHAPTER   XXIV. 

OUR    ENGLISH    COUSINS. 

When  in  England,  and  while  studying  the  methods  and  machinery 
of  English  i^ractical  banking,  many  novelties  came  under  my  attention 
and  some  that  seemed  to  me  deserving  of  particular  notice  I  will 
present  here. 

In  the  matter  of  gold  coinage,  I  found  that  the  Bank  of  England 
seemed  to  have  a  nearly  complete  monopoly  of  the  business.  To  be 
sure,  any  person  may  take  bar  gold  to  the  extent  of  £20,000  to  the 
English  Mint  and  have  it,  in  time,  returned  to  him  in  sovereigns  and 
half  sovereigns  to  the  precise  amount  which  he  deposited.  But  in  thus 
dealing  directly  with  the  Mint  there  are  expenses  and  losses  of  interest 
which  have  to  be  taken  into  account,  whOe  the  Bank  of  England  will 
receive  bar  gold  at  £3.  17s.  9d.  per  ounce,  and  pay  at  once  in  new 
sovereigns  or  half  sovereigns,  and  although  this  Bank  of  England 
paying-price  for  gold  is  slightly  below  its  market  value,  the  difference 
in  question  is  so  slight  as  to  be  more  than  offset  by  the  Mint  expenses 
I  have  mentioned.  By  its  deahngs  in  coin  and  bullion  the  Bank  has 
the  reputation  of  making  £30,000  a  year. 

The  Enghsh  sovereign  weighs  123.274  grains,  and  is  a  legal-tender 
so  long  as  it  does  not  weigh  less  than  122. 5.  When  of  standard  weight 
it  contains  113  l-63d  grains  of  pure  gold. 

The  English  half-sovereign  is  exactly  half  the  size  and  value  of  the 
sovereign. 

English  silver  and  bronze  coins  are  fiat  money — token  coins — for 
their  intrinsic  value  is  materially  less  than  their  face  value. 

The  seignorage  which  Great  Britain  makes  upon  these  subsidiary 
specimens  of  hard  money  forms  quite  a  large  source  of  Treasury 
revenue.  Thus  an  ounce  of  silver,  which  is  really  worth  50d.,  is 
manufactured  by  the  EngUsh  Mint  into  silver  coins  which  will  foot  up 
66  pence.  Here  is  a  direct  profit  of  Is.  4d.  an  ounce,  subject  only  to 
the  slight  cost  of  manufacturing. 

But  while  English  gold  coins  are  a  legal-tender  to  any  amount, 
English  silver  coins  are  a  legal -tender  only  to  the  amount  of  40s. ,  and 
bronze  coins  to  the  extent  of  Is. 

Bullion  brokers  take  quite  a  conspicuous  part  in  London  in  the 
business  of  handling  gold.  Thus,  when  an  American  banker  makes  a 
shipment  of  mixed  gold  to  London  it  is  first  passed  tlirough  the  hands 
of  bullion  brokers,  who  pass  upon  its  weight  and  fineness,  charging  an 


366  PRACTICAIi  BANKING. 

established  rate  of  commission  for  theii-  work,  and  returning  a  formal 
account  of  sales, 

I  found,  too,  considerable  that  interested  me  about  the  bank  note 
of  England. 

To  the  eye.  Bank  of  England  notes  are  a  very  plain  bill — merely 
black  printing  upon  white  paper  of  the  best  possible  quality.  This  paper 
is  specially  made  for  the  bank,  and  is  not  only  very  strong  but  also  a 
paper  not  easily  burned.  The  visitor  at  the  bank  is  shown  notes  that 
remain  worthy  of  redemption  after  having  been  the  victims  of  hot 
scorchings  and  fiery  singeings.  No  Bank  of  England  note  is  paid  out 
the  second  time  though  it  may  have  lived  only  to  cross  the  street.  In 
the  sorting  and  canceling  room,  where  hundreds  of  young  men  keep 
the  air  about  them  white  with  flying  notes,  the  bulk  of  the  circulating 
notes  they  were  cancehng  by  tearing  off  the  signatures  were  as  new 
and  fresh  in  their  appearance  as  if  they  had  never  traveled  outside  of 
the  bank.  After  cancellation  they  are  packed  away  in  small  wooden 
boxes  in  the  vaults  of  the  bank. 

The  stock  of  notes  on  hand  and  thus  ripening  for  destruction  in  the 
bank  fills  ten  or  twelve  thousand  of  these  httle  boxes  and  amounts  to 
perhaps  $8,500,000,000,  although  the  notes  are  taken  from  the  vaults 
and  burned  in  a  furnace  Avhen  they  have  had  five  years'  storage. 

The  Bank  of  England  note  is  very  popular  with  financiers  on 
account  of  its  splendid  workmanship  and  excellent  paper  and,  more 
than  that,  its  soundness  as  currency. 

They  arc  a  legal-tender  everywhere  and  by  everybody  in  England, 
with  the  singular  exception  that  they  are  not  a  legal-tender  by  the 
Bank  of  England  or  any  of  its  branches. 

Enghsli  country  bank  notes  are  not  legal-tender. 

Where  Bank  of  England  notes  are  used  as  legal-tender  in  payment 
of  debts  the  debtor  cannot  oblige  the  creditor  to  return  change. 

In  presenting  for  redemption  Bank  of  England  notes  at  the  counter 
of  the  Bank  of  England  or  any  of  its  branches,  sovereigns  may  be 
demanded,  but  not  half-sovereigns  or  silver,  and  its  notes  which  may 
have  been  wholly  or  partially  destroyed,  will  be  redeemed  if  satis- 
factory proof  can  be  furnished  the  Bank  that  the  missing  paper  has 
been  destroyed. 

In  sending  bank  notes  by  mail  the  Englishman  generally  cuts  them 
in  halves,  takes  a  careful  record  of  their  marks  and  numbers,  and 
sends  one  of  the  halves  by  registered  mail,  the  other  by  ordinary  post. 

The  loser  of  Bank  of  England  notes  may  "stop  "  them  at  the  Bank; 
but  it  is  a  curious  fact  that  he  must  pay  2s.  6d.  for  every  "  stoppage  " 
thus  made.  And  such  "stopping"  may  not  amount  to  much,  since 
the  notes  in  question  are  perfectly  good  in  the  hands  of  any  innocent 
holder,  "  stopped"  or  not  "stopped." 

The  Bank  of  England  has  such  a  well-nigh  complete  monopoly  of 
the  business  of  circulating  paper  money  in  the  United  Kingdom,  that 


OUR    ENGLISH    COUSINS. 


367 


many  people  hardly  seem  aware  of  the  fact  that  paper  issues  are  made 
there  by  any  other  banks.  Even  many  Englishmen  themselves  appear 
to  be  scarcely  aware  that  England  has  any  other  bank-note  than  the 
Bank  of  England  note,  for  I  have  seen,  in  a  standard  English  encyclope- 
dia, this  definition  of  a  bank  note:  "A  promissory  note  issued  by  the 
Bank  of  England,  and  payable  on  demand ;"  and  I  asked  a  London 
bank  clerk  (one  of  14  years'  service)  if  there  were  any  bank-notes  issued 
in  England  or  Wales  other  than  the  Bank  of  England  notes,  only  to 
receive  a  reply  in  the  negative. 

But  here  is  how  this  matter  really  stands.  Perhaps  most  persons 
know  that  the  Scotch  and  Irish  banks  have  a  paper  issue  of  their  own, 
but  many  do  not  seem  to  understand  that  there  are  both  joint-stock 
banks  and  private  banks  in  considerable  numbers,  both  in  England 
and  Wales,  that  issue  bank  notes. 

By  the  Act  of  1844,  no  bank  in  any  part  of  the  United  Kingdom 
which  did  not  at  that  time  issue  notes  was  allowed  thereafter  to  exercise 
that  privilege,  and  by  an  Act  passed  that  same  year  in  reference  to 
joint-stock  banks,  so  many  restrictions  and  limitations  were  introduced 
as  to  practically  forbid  the  starting  of  any  new  banks.  But  within  a 
comparatively  recent  period  the  Limited  Liability  Act  has  given  more 
latitude  in  the  matter  of  setting  up  banks. 

Of  the  joint-stock  banks  of  England  and  Wales,  of  which  there  are 
120,  56  in  the  provinces  are  entitled  to  issue  notes  to  the  extent  of 
£2,738,640;  but  their  actual  issue  is  considerably  less.  There  are  255 
private  banks  in  England  and  Wales,  of  which  57  are  in  London.  One 
hundred  and  seventeen  of  these  private  provincial  banks  have  an 
authorized  issue  of  £3,874,621. 

To  give  an  exact  idea  of  the  way  the  paper  circulation  business  stands 
to-day  in  the  United  Kingdom  I  here  furnish  a  late  circulation  returns 
of  the  joint-stock  and  private  banks  of  the  country : 


Sept.  19. 

Au^.  22. 

Increase. 

Decrease. 

Bank  of  England 

£24,667,598 
1,305,764 
1,433,314 

£25,325,000 
1,341,087 
1,468,420 

£657,405 

Private  banks 

35,323 

Joint-stock  banks 

35,106 

Total  in  England 

Scotland 

£27,406,673 
5,638,129 
5,.529,296 

£28,134,507 
5,568,068 
5,675,766 



£70,061 

£727,834 

Ireland 

146,470 

United  Kingdom 

£38,574,098 

£39,378,341 

£70,061 

£874,304 

The  English  private  banks  are  below  their  fixed  issue £2,107,036 

The  English  joint-stock  banks  are  below  their  fixed  issue 921,475 

Total  below  fixed  issue  in  England £3,028,511 

The  Scotch  lianks  are  above  their  fixed  issue 2,961,779 

The  Irish  banks  are  below  their  fixed  issue 825,198 

The  amalgamation  or  failure  of  banks  which  had  the  right  to  issue 

circulation  has  been  one  cause  that  has  led  to  the  difference  of  over 


368  PRACTICAL    BAXKIXG. 

£3,000,000,  as  stated  above,  between  the  authorized  and  actual  circu- 
lation of  these  private,  and  joint-stock  banks.  But  this  has  not 
resulted  in  a  corresponding  and  dangerous  reduction  in  the  total 
circulation  because  the  Act  of  1844  provided  that  the  Bank  of  England 
should  be  allowed  to  issue  additional  circulation  to  two-thirds  of  the 
amount  of  reduction  from  such  causes.  The  profit  the  Bank  derives 
from  its  issue  department  is  the  interest  received  upon  the  £14,000.000 
of  Government  debt  and  securities,  which,  at  the  rate  of  3  per  cent. ,  is 
£420,000  a  year. 

Thus  far,  in  this  chapter,  the  Bank  of  England  has  had  a  prominent 
place  and  I  will  briefly  mention  a  few  descriptive  facts  which  may  aid 
the  reader  to  realize  this  bank's  importance  in  English  money  matters. 
In  its  service  there  is  a  small  army  of  well-trained  clerks,  for  this  insti- 
.tution,  with  its  capital  of  ninety  millions  of  dollars,  and  dating  back 
to  1694,  to-day  employs  1,000  men.  The  building  in  which  tliese  clerks 
do  their  work  covers  five  acres  of  ground.  It  has  not  a  single  window 
upon  the  street,  the  light  of  day  being  admitted  through  open  courts. 
It  has  a  clock  in  the  centre  of  the  bank  with  fifty  dials.  The  Bank  of 
England  is  situated  in  the  centre  of  London,  but  it  has  one  branch  at 
the  West-End  of  the  city,  and  many  branches  in  the  pro^^nces, 

The  amount  of  Bank  of  England  notes  afloat  generally  averages 
about  £20,000,000,  and  its  deposits,  out  of  which  it  of  course  makes  a 
gi'eat  deal  of  money,  range  from  £12,000,000  to  nearly  twice  that  sum. 

Another  financial  instrument  in  which  the  American  visitor  to  Eng- 
lish banks  takes  much  interest  is  the  "  crossed"  check.  These  are  in 
the  most  general  use  in  England.  While  in  London  I  had  occasion  to 
mention  to  some  English  bankers  that  we  did  not  use  the  crossed  cheek 
at  all  in  the  United  States,  and  that  oiu*  financiers  knew  so  little  about 
them  that  the  majority  of  them — in  fact,  very  few  of  even  professional 
bankers— would  know  a  crossed  check  if  shown  one.  The  Londoners 
were  much  surprised  at  this  statement,  and  could  not  see  how  we  could 
possibly  get  along  witliout  the  use  of  checks  of  this  sort. 

The  universal  employment  in  England  of  this  crossed  check  enables 
payers  to  remit  checks  in  comparative  safety,  in  face  of  the  fact  that 
l*arliament  long  ago  freed  the  banks  from  all  obligations  to  procure 
identification  of  parties  presenting  common  checks  for  collection. 

A  crossed  check  is  simply  one  that  has  upon  its  face  marks  which 
signify  that  it  must  be  presented  through  some  other  bank  or  banker; 
and  checks  of  this  description  will  not  be  cashed  if  they  reach  the  bank 
up(jn  which  they  are  drawn  by  any  other  path.  They  are  absolutely 
wortliless  for  presentation  in  the  hands  of  the  wrong  parties.  This  is 
not  simply  a  matter  of  usage,  for  an  Act  of  Parliament  forbids  a  banker 
to  give  money  over  the  counter  for  a  crossed  cheek  drawn  on  him. 

The  favor  with  which  this  method  of  manipulating  checks  is 
received  in  London  business  circles  is  indicated  by  the  {)raetice  which 
so  generally  prevails  among  the  charitable  societies,  and  subscription 


OUR    ENIttT.ISH    CQITSINS. 


369 


agents,  of  instructing  donors  to  cross  all  tlie  cliecks  which  they  remit. 
An  advertisement  of  the  London  Relief  Association  reads: 

Cheques  and  post-office  orders  sliould  be  crossed  "  Ilerries  &  Co.,"  and  made 
payable  to  J.  ll.  Allan,  Es(i. 

For  specimens  of  London  checks  see  Forms  87,  88  and  89 — two  of 
the  crossed  type  and  one  of  the  common  order — simply  a  check  to  be 
collected  m  any  way  the  holder  elects.  The  first  is  an  ordinary  crossed 
cheque  which  mnst  come  to  the  London  &  Westminster  Bank  through 
another  bank.  The  two  lines  with  "&  Co."  between  them  constitute 
the  crossing;  or,  the  lines  without  the  "&  Co."  will  do  as  well. 


/?St  JJJf(i> 


<cJ^a^     l^c^S/"^///^. 


4/ul-  c:>^^j7}<.<::Cy7<y^ 


±^ 


f  ro^ 


Form  87. 

When  the  drawer  knows  the  name  of  the  payee's  banker  he  inserts  it 
in  his  crossing  as  in  the  next  illustration  (see  Form  88)  which  is  a 
check  crossed  specially.  This  cheek  will  be  paid  by  the  London  & 
Westminster  Bank  to  Messrs.  Glyn  &  Co.,  only. 


/l^A^ff& 


XZi      (?c^  S/^/Sfo. 


Foriii  88. 

Finally,  on  page  370  will  be  found   a  copy  of  the  ordinary,  open 


370  PKACTICAL    BA>-KIXG. 

cheque  (see  Form  89)  wliieh  can  be  paid  by  the  bank  to  anybody  who 
presents  it. 


Form  89. 

I  will  briefly  mention  some  points  in  English  bank  practice  which  I 
noted  as  Avorthy  of  attention. 

English  banks  and  bankers  generally  furnish  their  customers  with 
check-books,  making  no  charge  for  them.  Near  the  end  of  each  check- 
book so  furnished,  a  blank  order  for  a  new  one  is  printed  so  as  to 
remind  the  owner  that  it  is  time  for  him  to  send  for  another  book. 

This  custom  may  have  grown  out  of  the  desire  on  the  part  of  the 
banks,  which  I  have  found  quite  prevalent,  that  thoir  customers  should 
use  a  uniform  check,  so  as  to  reduce  the  liabilities  to  frauds  and 
forgeries. 

When  an  Englishman  receives  a  check  which  is  not  dated  he  is 
quite  apt  to  insert  what  he  believes  should  be  the  correct  date  and 
place  his  initials  under  the  same.  The  Bills  of  Exchange  Act  of  1882 
appears  to  give  him  authority  to  make  this  insertion. 

English  bankers  have  a  custom  of  considering  a  check  out  of  date 
if  the  date  is  twelve  months  or  more  old,  and  of  refusing  to  pay  such 
checks. 

Under  English  law  the  holder  of  a  check  which  has  been  drawn 
payable  to  bearer  may  change  it  to  a  payabie-to-the-order-of  any 
person,  but  he  cannot  change  one  from  order  to  bearer.  This  last 
change  can  only  be  made  by  the  drawer,  and  if  he  makes  such  a 
change  he  must  put  his  initials  under  the  alteration.  This  initializing 
method  is  not  a  practice  in  this  country. 

English  bankers  do  not  deem  a  pencil  endorsement  illegal,  but 
refuse  such  generally  (if  they  can)  because  they  are  so  easily  removed, 
and  so  easily  become  illegible. 

In   cashing   checks   payable  to  bearer   English   bankers  are  not 


OUR    ENGLISH    COUSINS.  371 

required  to  pay  any  attention  to  their  endorsements.  In  cashing 
cheeks  payable  to  order  they  are  only  required  to  see  that  the  checks 
appear  properly  endorsed.  In  neither  ease  are  the  banks  required  to 
secure  an  identification  of  tlie  i)arty  for  whom  tho  checks  are  cashed. 
Parliament  some  years  ago  enacted  a  law  relieving  the  banks  of  any 
responsibility  in  this  matter  of  identification.  London  bankers  and 
merchants  told  me  that  it  would  be  impossible  for  London  to  get 
through  its  daily  check  paying  business  were  identifications  demanded, 
and  they  wondered  how  we  managed  to  pull  through  with  an  identi- 
fication system  still  in  vogue. 

I  have  seen  the  Paying-Cashier  of  the  Bank  of  England  cashing 
cheeks  for  a  long  line  of  customers  as  rapidly  as  he  could  throw  out 
the  notes  and  change,  paying  little  attention  to  the  persons  of  the 
actual  presenters — only  pausing  to  see  that  order  checks  had,  on  their 
backs  the  right  names,  while  bearer  checks  received  only  a  face  scanning. 

London  bankers  require  special  guarantees  for  stamped  endorse- 
ments, because,  they  say,  anybody  may  get  hold  of  the  stamps  and 
use  them. 

Wliere  the  initials  of  the  Christian  name  of  an  endorser  agree  with 
his  full  name  they  are  readily  accepted.  Thus  R,  D.  Smith  will  be 
accepted  for  Richard  Dorman  Smith. 

Enghsh  bankers  term  a  man  who  makes  his  mark  in  lieu  of  a  regu- 
larly written  signature  a  "  marksman  " — a  rather  curious  use  of  a  word 
which  is  always  used  in  a  different  sense  in  this  country.  Their  methods 
of  getting  up  a  '  •  signatui-e  "  by  a  mark  is  the  same  as  with  us — a  method 
in  fact  which  we  have  directly  copied  from  them.     Thus : 

'OVjGjLo.Ajt    ^^     ^^CLJO^JLjA., 

Procuration  endorsements  and  signatures  are  largely  in  use  in  Eng- 
lish business  circles,  though  they  are  never  accepted  in  real  red  tape 
circles  without  an  accompanying  bank  guarantee.  P.  P.,  or  per  pro., 
are  the  usual  forms  for  expressing  endorsements,  etc. ,  of  this  sort. 

Where  endorsements  of  payees  of  checks,  drafts,  etc.,  are  not  forth- 
coming for  one  reason  and  another,  banks  have  a  custom  which  is 
common  with  us  of  allowing  such  vouchers  to  be  deposited  with  them 
on  a  substitute  for  an  endorsement  of  this  sort:  '"  Received  payment 
and  placed  to  the  credit  o/ so-and-so,"  the  signature  of  the  bank  receiv- 
ing the  same  being  attached. 

It  is  the  custom  in  many  of  the  English  banks  to  pay  such  checks 
of  a  customer  which  come  in  through  a  morning's  clearing  as  are  within 
the  amount  of  his  balance  and  to  retiu-n  the  rest.  This  is  a  method 
which  I  have  decidedly  condemned  when  discussing  this  point  else- 
where.    I  now  find  that  the  Bank  of  England  treats  a  failing  balance 


o72  PRACTICAL    BANKING. 

precisely  as  we  have  advused.  Where  a  customer's  credit  balance  is 
insufficient  to  meet  all  the  checks  which  pour  in  upon  it  at  clearing 
the  Bank  of  England  pays  none  of  tiiem — sends  them  all  back  through 
the  clearing,  with  the  "N.  S.''  report  upon  them,  a  label  which,  in 
English  banking,  means  "not  sufficient  funds." 

Another  English  banking  abbreviation  is  "R.  D.,"  meaning  about 
the  same  as  "no  funds,"  biat  Uterally  translatable  "Refer  to  Drawer," 
and  a  check,  on  which  the  figures  vary  from  the  words,  would  usually 
be  returned  marked  with  the  curt  phrase,  "words  and  figures  differ." 

London  banks  endeavor  to  hunt  up  drawers  of  checks  which  reach 
them  through  clearing  in  a  technically  incorrect  condition,  and  thus 
try  to  have  them  put  right  without  a  recourse  to  endorsers  and  drawers 
through  the  Clearing-House  path. 

When  an  English  banker  wishes  to  be  advised  by  wire  or  post 
whether  a  check  is  paid  or  not  paid  he  says,  "  Wire  (or  write)  its  fate." 

The  habit  of  using  alcoholic  stimulants  is  recognized  by  an  Enghsh 
banking  custom  which  requires  witnesses  to  signatures  and  to  payments 
of  cash  on  checks  drawn  by  persons  under  the  influence  of  alcohol. 

English  banks  do  not  certify  checks. 

There  is  no  grace  on  sight  drafts  in  England. 

Bills  due  on  "bank  holidays"  are  payable  the  day  after.  Those 
due  on  Sunday,  Good  Friday,  Christmas  Day,  and  regularly  proclaimed 
days  of  fast  and  thanksgiving,  are  payable  the  day  before. 

The  London  method  of  treating  pass-books  is  somewhat  different 
from  ours.     I  have  elsewhere  described  this  London  style. 

All  customers'  checks  are  finally  returned  to  the  drawers  after  they 
have  acknowledged  them  to  be  correct  and  liave  receipted  for  them. 

Every  English  check  must  bear  a  penny  stamp  no  matter  for  how 
small  an  amount  it  may  be  drawn. 

HUSBANDS  AND  WIVES. 
In  England  a  married  woman  cannot  open  a  bank  account  unless 
she  has,  in  writing,  the  formal  consent  of  her  husband ;  neither  can  a 
woman  who  has  opened  an  account  with  an  English  bank  while  she 
was  a  single  person  withdraw  that  money  after  she  is  married  unless 
she  has  the  approval  of  her  husband. 

STARTING   A   BANK   IN    LONDON. 

There  are  some  features  of  such  a  movement  that  differ  slightly 
from  the  States'  way  of  doing  the  same  thhig.  The  professional 
promoter  is  generally  called  into  use  at  an  early  stage  of  the  business. 
Yet  the  promotion  business  has,  of  late,  become  such  a  loud  financial 
scandal  that  banks,  in  starting  to  obtain  subscriptions  to  shares,  have 
felt  called  upon  to  state  that  no  money  is  to  be  paid  to  promoters. 

An  advertisement  of  one  new  London  bank,  which  I  have  before 
me,  states:  "  No  promotion  money  has  been  paid,  or  will  be  paid,  the 
only  contract  entered  into  on  behalf  of  the  company  being  one  between 


OUK    ENGLISH    COUSINS.  373 

Robert  Turner  Rhode  and  Tlionia.s  Colman  for  advertising  the 
prospectus." 

What  organizer  of  a  big  bank  in  an  American  city  would  tliink  of 
printing  sucli  a  notice  as  tliis  ? 

London  bank  shares  are  sometimes  fixed  at  £10  each;  sometimes 
£20. 

It  is  quite  common  for  the  new  bank  to  allow  5  per  cent,  interest 
on  stock  payments  made  in  advance  of  the  call. 

English  branch  banks  have  quite  often  local  boards  or  committees, 
under  the  control  and  direction  of  the  central  board. 

Applicants  for  the  new  shares  are  usually  required  to  depo.sit  £1 
per  share  subscribed  for. 

Here  are  a  couple  of  advertisements  which  have  an  interesting 
bearing  upon  the  business  of  floating  companies  and  securing  Directors : 

TWO  HUNDRED  AND  FIFTY  POUNDS  WANTED,  IMMEDIATELY,  FOR  A 
few  weeks,  for  preliminary  expenses  of  floating  a  railroad  company  with  a  very 
influential  Board  and  Government  endorsement.  Either  one  lender,  or  several  lenders 
as  a  syndicate.  Liberal  bonus  paid  with  loan  immediately  after  allotment.  Apply 
Company,  117,  Chancery-lane. 

IRECTOR.— A    GENTLEMAN,  WITH    FRO.M    £.500   TO    £1,000   AVAILABLE 

(•ai)ital,  can  be  received  on  the  Board  of  a  well-established  company,  which  has 

paid  dividends  for  the  past  four  years.     Moderate  fees  and  6  per  cent,  interest  on 

investment.   Apply,  by  letter  only,  Y  33,  Address  and  Inquiry  office,  The  Times,  E.G. 

BANK   SHAREHOLDERS'    MEETINGS. 

I  have  elsewhere  spoken  of  the  generally  somewhat  farcical  character 
of  shareholders'  meetings — of  the  difficulty  experienced  in  securing  a 
decent  attendance  at  them  in  common  times,  and  of  the  routine  and 
red-tape  style  in  which  their  doings  are  apt  to  be  transacted.  These 
characteristics  are  somewhat  in  contrast  with  the  way  the  shareholders* 
meetings  of  the  great  joint-stock  banks  and  discount  companies  of 
London  are  conducted.  There  the  general  course  is  to  prepare  a  good 
sized  hall  for  their  stockholders'  meetings,  for  shareholders  in  London 
seem  to  have  a  commendable  habit  of  attending  these  meetings. 

It  is  just  possible  that  the  custom  of  having  a  free  lunch  at  these 
gatherings  may  increase  the  attendance.  Tliis  lunch  is  served  just 
before  the  meeting. 

"Yes,''  said  a  London  bank  man  to  me,  "it  is  much  the  best  to 
have  a  good  lunch  before  the  meeting,  since  such  a  lunch  is  sure  to 
improve  the  harmony  of  the  stockholders. " 

At  the  meetings  the  prominent  and  able  banker  who  takes  the  chair 
generally  makes  a  long  and  formal  address,  relative  not  only  to  the 
bu.siness  of  the  bank  during  the  last  half  year  and  general  prospects  of 
the  bank  for  the  next  six  months,  but  also  filled  with  reflections  and 
suggestions  regarding  the  general  financial  situation  at  home  and 
abroad.  He  is  generally  followed  by  other  influential  speakers,  or,  his 
report  upon  the  doings  of  the  bank  may,  and  quite  often  does  lead  to 
a  discussion,  in  which  prominent  shareholders  take  an  active  part; and 


374  PRACTICAL   BAXKINO. 

I  observed,  that  in  s«nie  of  tliese  stockholders'  meetings,  held  after  a 
run  to  a  dividend  that  had  been  checkered  by  losses,  discussions  of  a 
pretty  sharp  character  took  place. 

Reporters  attend  these  London  stockholders'  gatherings,  and  the 
next  issues  of  the  leading  London  papers  contain  all  the  facts,  figures 
and  speeches  presented.  The  publicity  of  these  meetings,  and  the  way 
they  are  reported  in  the  press,  are  peculiar  features  of  London  banking. 

Herein  is  a  change  from  customs  formerly  prevailing  in  these 
premises.  It  is  not  until  comparatively  recent  times  that  the  Bank  of 
England  made  any  public  returns  of  its  condition.  It  used  to  refuse 
point-blank  to  show  its  hand;  and  neither  the  people  nor  Government 
could  force  the  old  Bank  to  make  any  statements  regarding  its  circu- 
lation, deposits,  reserve,  etc.  Now  it  prints  a  full  and  clear  weekly 
statement  of  its  condition. 

After  the  meetings,  in  the  evening,  there  is  a  big  dinner,  to  which 
Directors,  Managers,  etc.,  and  distinguished  guests  are  invited. 

CONSOLS. 

These  certificates,  which  represent  the  vouchers  for  the  consolidated 
debt  of  England — the  word  being  an  abbreviation  of  consolidated — are 
steadily  quoted  in  the  money  articles  of  the  London  press — and  some- 
times in  this  country  as  well — in  a  way  which  is  rather  confusing  to 
the  average  American  reader.  The  record  of  the  monetary  day  of 
London,  so  far  as  it  touches  on  consols  will  read  thus,  the  quotations 
varying  constantly,  of  course.     We  quote  from  the  London  ' '  Times  " : 

'•  Consols  are  unchanged  at  94%  for  cash  and  94%  for  November  settlement." 
This  record  I  happen  to  quote  from  the  ' '  Times"  of  October  21st. 

A  sale  for  cash  is  an  easily  understood  matter.  That  of  course 
means  payment  at  once.  But  the  second  quotation  refers  to  sales  ''  for 
account,"  as  the  English  phrase  is,  and  in  that  case  it  is  understood 
that  they  are  to  be  paid  for  on  the  next  "settling"  day  for  consols, 
which  is  the  first  of  the  next  coming  month. 

On  the  London  Stock  Exchange  there  are  special  settling  days  for 
securities  of  all  sorts,  including  transactions  in  foreign  exchange. 

BANK   PROFITS. 

I  have  been  often  asked  how  it  is  these  great  Ijondon  banks,  with 
their  enormous  expenses  (£150,000  in  six  months  in  one  case)  and  their 
habit  of  paying  interest  upon  deposits,  and  in  face  of  the  fact  that 
discount  rates  are  low,  can  make  such  enormous  dividends— say  from 
7  to  20  per  cent,  a  year^— besides  carrying  heavy  sums  to  the  "rest" 
accounts.  This  question  I  can  easily  answer,  having  specially  looked 
into  this  point. 

These  great  and  successful  banks  have  enormous  deposits.  They 
have  two  classes  of  accounts — demand  deposit  accounts  which  are 
open  steadily  for  reception  of  deposits  and  payment  of  cheeks  and 
noon  which  tiiey  pay  no  interest,  and  time  deposits  upon  which  they 


Ol'R    ENGLISH    COUSINS. 


375 


pay  low  rates  of  interest.  The  first-named  accounts,  in  the  great 
banks,  are  very  ntunerous,  and  carry  handsome  daily  balances,  making 
up  an  average  line  of  deposits  which  are  of  great  value,  and  which  the 
bank  can  depend  upon  in  making  discounts. 

Some  of  these  banks  allow  overdrafts,  upon  which  they  charge 
pretty  stiff  interest  rates.  "And,"  said  a  Londoner  to  me,  "our  banks 
have  a  habit  of  charging  their  dealers  pretty  well  for  everything  they 
do  for  them." 

Here  is  an  interesting  table  of  recent  date  giving  the  figures  of  the 
large  London  banks,  which  is  so  made  up  as  to  illustrate  some  of  my 
statements,  and  which  also  permits  a  comparison  of  the  business  and 
profits  of  the  city  banks  having  a  comparatively  local  business  with 
those  which  also  do  a  country  business  through  branches. 


City  Banks. 


London  &  Westminster,  Lim 

London  Joint  Stock,  Limited 

Glyn,  Mills,  Currie  &  Co , 

Union,  Limited 

Citj',  Limited 

Imperial,  Limited 

Alliance,  Limited 

Consolidated,  Limited 

Central,  Limited . . 

London  iV:  South-Westem,  Lim. 
Total,  ten  banks 


City  Banks  with  CotJNTitT  Bka 
London  &,  County,  Limited. . . 
National  Provincial,  Limited. . 

Lloyds,  Limited 

London  &  Provincial,  Limited 

Capital  &  Counties,  Limited . . 

Total,  five  banks 


Deposits. 


£35,694,000 

11,885,000 

14,848,000 

14,204,000 

6,014,000 

3,646,000 

4,656,000 

3,640,000 

1,708,000 

4,879,000 


Capital 

PAID    IN. 


5  M 


£2,800,000 

1,800,000 

1,000,000 

1,705,000 

1,000,000 

675,000 

800,000 

800,000 

156,250 

400,000 


P 
^    . 

i-i  '■/:> 


£91,174,000 


NCHES. 

£33,804,000 

39,311,000 

17,357,000 

5,578,000 

9,789,000 


£11,136,250 


£20 
15 

10 
15 
10 
4 
5 
20 


£2,000,000 

420,000 
1,807,-500 

1,300,000 
400,000 
800,000 


£20 

12 

8 

5 


£105,839,000         £6,727,500 


16% 


10 
10 


20% 

20 
20 

16X 
18 


£42 
40 

43K 
S4X 

17 

11}^ 

42 


£93 

48 
55 

29 
20 


In  addition  to  capital  the  first  ten  banks  have  a  surplus  of  £5,600,000,  and  the 
five  following  banks  have  a  surplus  of  £4,230,(X)0. 

SOME    EXCELLENT    IDEAS. 

When  I  first  went  to  England  I  had  somewhat  of  an  idea  that 

English  bankers  were  perhaps  a  little  slow  and  old-fashioned.     I  did 


376  PRACTICAL    BAXKIXG. 

find  that  in  some  matters  they  were  following  exactly  the  same 
methods  that  were  in  use  two  or  three  hundred  years  before ;  but  as  I 
could  not  see  how  those  methods  could  be  improved  I  concluded  that 
an  old-fashioned  idea  might  yet  be  a  good  one.  Further  acquaintance 
with  their  customs  taught  me  that  many  of  oiu*  best  business  methods 
here  were  simply  impoi'ted  from  there,  and  I  found  still  other  of  their 
ideas  and  ways  in  carrying  out  the  details  of  vast  mercantile  and 
financial  transactions  which  might  be  profitably  introduced  here. 

In  this  connection  I  will  speak  of  the  Institute  of  Chartered 
Accountants  as  one  of  these  old-fashioned  British  organizations  which 
should  be  copied  in  this  country. 

There  is  one  feature  of  the  management  of  the  Institute  which  it  is 
proposed  by  our  American  Bankers'  Association  to  uacorporate  into  its 
plan  for  associate  member.ship  in  that  association,  and  that  is  a  system 
of  what  may  be  termed,  civil  service  examinations  of  bank  officers. 
The  English  society  holds  a  preliminary  examination,  an  intermediate 
examination,  and  a  final  examuiation  in  the  month  of  December  of 
each  year,  each  of  which  lasts  three  days.  Persons  who  propose  to 
present  themselves  for  these  examinations  are  required  to  give  at  least 
thirty  days'  notice.  These  examinations  are  held  at  the  Copthall 
Buildings,  London,  E.  C. 

Tlien,  in  London  there  is  a  large  and  strong  organization,  termed 
the  London  Bankers'  Protection  Society.  When  bank  thieves,  forgers, 
etc.,  are  detected,  the  attorney  of  this  association  is  pretty  sure  to 
appear  as  the  principal,  or  aid,  in  their  prosecution.  And  the  organi- 
zation is  also  active  in  offering  rewards  for  the  detection  of  counter- 
feiters, forgers,  etc. 

Institutions  of  this  character,  which  exist  in  many  English  cities, 
should  be  more  generally  established  here.  We  have  some  of  them, 
but  there  are  altogether  too  few  of  these  organizations  existing. 

Wlierever  there  is  a  town  or  city  in  the  United  States  having  several 
banks,  those  banks  should  unite  in  a  plan  having  for  its  object  the 
common  protection  of  each  and  all  from  frauds  and  thefts. 

Both  in  England  and  in  tliis  country  there  has  been  a  custom  of 
late  years  with  many  of  the  largest  and  best  managed  banks  of  insuring, 
through  well-established  guarantee  companies,  the  fidelity  of  their 
entire  corps  of  officers,  on  the  favorable  terms  wliich  can  by  this  method, 
be  made  with  the  fidelity  companies,  and  paying  the  cost  of  the  policies 
at  the  expense  of  the  bank.  This  is  a  practice  deserving  of  high  com- 
mendation, and  doubtless  the  time  is  rapidly  approaching  when  it  will 
be  very  generally  adopted  by  the  banks  of  the  United  States. 

There  is  another  bank-insurance  step  not  uncommon  with  the 
English  banks,  but  which  is  hardly  known  in  America.  There  are 
banks  in  London  and  elsewhere  in  Great  Britain  which  arrange  schemes 
of  life  insurance  for  their  entire  staffs  of  clerks  with  first-class  life 
insurance  companies,  paying  either  the  whole  or  one-half  the  cost  of 


OUR    ENGLISH    COUSINS.  377 

the  policies  taken  out.  By  such  action  as  this,  the  banks  show  a 
humane  interest  in  the  weliare  of  their  officers  and  those  dependent 
upon  thoui,  which  must  strengthen  the  confidence  of  the  employees  in 
the  management  of  the  institutions  they  are  connected  with  and 
deepen  the  ties  of  devotion  to  their  best  inteiests.  And  such  generous 
insurance  has  also  a  tendency  to  turn  the  mind  of  the  insured  from 
thoughts  of  those  spectUative  schemes  so  often  entered  into  by  the 
bank  officer,  who  sees  little  hope  of  putting  by  from  his  wages  a  proper 
provision  for  the  future  of  those  who  are  dependent  upon  him  and  his 
earnings. 

As  1  have  thought  of  this  insurance  matter  and  of  its  adoption 
among  our  banks,  it  has  seemed  to  me  as  if  the  officers  in  banks  having 
a  large  staff  of  clerks  might  combine  together  and  insure  their  own 
fidelity  through  their  own  bank  organization;  or  the  officers  of  all  the 
banks,  in  a  large  town  or  city,  might  unite  in  a  mutual  fldeUty  insur- 
ance organization. 

Perhaps  the  insurance  system  in  vogue  at  the  Bank  of  England  is 
as  good  a  model  of  an  organization  of  this  character  as  exists  any- 
where. Every  officer  of  that  bank  is  obliged,  on  entering  its  service, 
to  give  the  bank  a  fidelity  bond  of  a  thousand  pounds.  The  lowest 
sum  for  which  a  London  Fidelity  Insurance  Company  would  furnish, 
such  a  bond  would  be  £5  a  year.  But  the  clerk  of  the  Bank  of  England 
pays  this  £5  a  year  into  a  guarantee  fund,  which  was,  many  years  ago, 
established  by  the  bank  itself — in  effect,  takes  of  his  own  bank  his 
fidelity  policy  or  bond.  All  the  profits  of  the  business  are  steadiy 
added  to  the  fund,  and,  at  the  date  of  the  last  reports  of  the  bank,  it 
amounted  to  £50,000.  The  losses  of  the  bank  through  the  dishonesty 
of  its  clerks  since  1845  up  to  the  date  of  this  report  had  been  only  twO' 
or  three  thousand  pounds.  The  income  from  this  fund  is  wholly  used 
for  relieving  the  necessities  of  the  widows  and  orphans  of  former 
officers  of  the  bank.  All  its  officers  are,  therefore,  directly  interested 
in  increasing  it.  And  with  this  end  constantly  in  view,  it  becomes  a 
matter  of  duty  with  them,  not  only  not  to  endanger  this  fund  by  their 
own  unfaithfulness,  but  also  to  be  ever  on  the  alei-t  to  see  that  fellow 
officers  do  not  steal  from  it  by  stealing  fi-om  the  bank. 

The  Bank  of  England  has  had  upon  its  Boards  of  Management, 
during  the  period  over  which  it  is  easy  for  the  financial  student  of  to- 
day to  extend  a  direct  observation,  some  of  the  strongest  and  most 
experienced  financiers  and  merchants  of  London ;  and  it  is,  as  a  purely 
business  institution,  probably  managed  with  more  business  ability 
than  any  other  bank  in  the  world. 

But,  after  all,  that  feature  of  its  administration  which  commands 
the  most  earnest  admiration  of  thoughtful  bankers  is  the  one  which 
characterizes  its  treatment  of  its  subordinate  officers.  It  is  quite  in 
the  habit  of  taking  a  paternal — a  humane — interest  in  all  its  employees. 

The  men  who  have  been  Governors  of  the  Bank  of  England,  in 


378  PRACTICAL  BANKING. 

modern  times,  at  lea«;t,  have  been  noble  speeimens  of  the  Christian 
business  man — the  gentlemen  who  to-day  occupy  that  position  being 
most  worthy  successors  of  many  others  of  the  same  type. 

Here  are  some  of  the  ways  in  which  the  Bank  of  England  shows  a 
noble  interest  in,  and  care  for,  the  welfare  of  its  thousand  officers,  and 
which  I  mention  because  they  also  are  a  part  of  the  methods  which  I 
believe  may  with  profit,  be  copied  by  some  banks  in  this  country. 

At  a  recent  convention  of  bankers  in  Saratoga,  an  accomplished 
bank  officer,  in  a  paper  on  a  model  bank— a  paper  of  ability  and 
interest — pictured  a  systematic  pension  system  as  one  of  the  features 
of  his  model  banking  institution. 

The  Bank  of  England  pensions  those  of  its  clerks  who  have  served 
the  bank  in  a  faitlif ul  manner  for  a  certain  length  of  time,  and  this 
method  in  its  administration  has  worked  admirably. 

It  is  not  alone  in  this  practice  of  looking  after  the  interests  of  faithful 
employees.  Other  London  banks  as  well  as  those  of  some  other  Eng- 
lish cities,  have  their  sviperannuation  schemes  by  which  provision  is 
made  for  the  comfortable  retirement  at  an  advanced  age  of  those  bank 
clerks  who  have  by  long  and  faithful  service  worn  themselves  out  by 
hard  work,  and  who  have  certainly  won  a  title  to  a  pension  for  the 
rest  of  their  hves  from  the  employers  whom  they  have  so  well  served. 

It  has  often  been  Tirged  that  our  banks — particularly  those  in  the 
great  cities  which  have  large  staffs  of  clerks — might,  with  profit,  look 
a  little  sharper  after  their  physical  health  and  comfort — that  is,  might 
possibly  extend  a  little  closer  super\dsion  over  them,  as  regards  these 
points,  while  they  were  under  their  direct  observation. 

The  Bank  of  England  has  its  medical  superintendent,  an  eminent 
physician,  who  attends  at  the  bank  one  hour  each  day,  and  who  is 
employed  by  its  Directors  in  all  matters  directly  connected  with  the 
health  of  its  employees.  Every  clerk,  before  recei^■inghis  commission, 
is  examined  to  see  whether  or  not  he  is  well  enough  and  strong  enough 
for  bank  work.  Clerks  who  absent  themselves  on  account  of  illness, 
are  visited  at  once  by  the  bank  physician.  Clerks  applying  for  absence, 
on  account  of  illness,  are  examined  by  the  physician.  If  a  clerk  com^- 
plains  that  his  special  work  is  injurious  to  him,  the  bank  physician 
looks  into  his  case,  and,  if  practicable,  relieves  him  by  ordering  a 
ehange  of  duties. 

The  bank  has  also  provided  for  its  officers — officers  whose  daily 
routine  of  work  extends  from  9  A.  M.  to  5  P,  M.  —  the  best-appointed 
bank  lunch  room  I  have  ever  visited. 

It  grants  frequent  extra  holidays  to  old  and  faithful  officers,  promotes 
systematically,  and  makes  extra  grants  of  pay  to  its  clerks  in  years  of 
exceptional  prosperity. 


TRUST    COMPANIES.  879 


CHAPTER   XXV. 

TRUST    COMPANIES. 

Although  we  are  supposed  to  be  considermg  banking  it  is  highly 
proper  that  the  trust  couipanies  should  receive  some  attention,  for  they 
come  so  near  beuag  banks  that  the  National  banks  who  have  found 
them  such  dangerous  and  successful  competitors  for  business  are  often 
found  assertmg  that  they  are  neither  more  nor  less  than  banks — State 
banks  sailing  under  State  charters.  The  remark  is  often  heard  that 
depositors  put  their  money  in  trust  companies  because  they  are  trust 
companies,  established  to  hold,  in  trust,  moneys,  and  to  invest  the 
same  in  certain  restricted  securities  of  the  most  unquestionable 
character.  But  those  best  acquainted  with  both  National  banks  and 
trust  companies  know  well  enough  that  both  classes  of  institutions 
where  they  are  properly  managed,  invest  their  deposits,  capital,  etc. , 
in  about  the  same  class  of  securities,  and  are  equally  careful  and  con- 
servative in  the  matter  of  their  loans.  To  be  sure  the  trust  companies 
move  along  under  certain  State-made  restrictions  as  regai'ds  the 
character  of  the  investments  they  may  make — restrictions  which  were 
framed  for  the  purpose  of  protecting  the  "trust  funds"  which  they 
hold.  But  along-side  these  trust  companies'  State  defenses  may  be 
placed  the  checks  and  guards  against  uuproper  and  dangerous  loans 
set  tip  by  the  National  banks,  which  are  of  a  very  conservative  and 
sagacious  character. 

Trust  companies  often  claim  that  they  are  not  banks  because  they 
do  not  solicit  or  deshe  accounts  with  merchants,  and  that  they  are  not 
in  any  sense  the  "wings  of  commerce,"  which  regular  banks  have 
always  been  euphoniously  termed.  If  they  are  not  entitled  to  be  so 
called  they  certainly  have  claim  to  the  credit  of  furnishing  a  good  deal 
of  power  to  the  legitimate  wiags  of  trade,  and,  in  the  matter  of  current 
accounts  with  their  dealers,  they  do  a  deposit-receiving  and  check- 
paying  business  so  like  the  National  and  State  banks  pi'oper  that  they 
are  hardly  to  be  distinguished  from  them. 

With  these  facts  in  ^'iew  it  wUl  not  take  an  intelligent  financier 
very  long  to  come  to  the  conclusion  that  the  difference  between  the 
two  classes  of  institutions,  as  far  as  the  question  of  which  is  a  bank 
and  which  is  not  a  tank  is  concerned,  is  more  technical  than  real. 

Coming  back  to  the  point  named  at  the  opening  of  this  paragraph, 
I  remai'k,  that  the  reason  careful  men  deposit  their  money  in  the 
average  trust  company  of  the  period  ratherthau  in  the  average  National 


380  PRACTICAL    BAXKIXG. 

bank  is  generally  because  the  former  pays  more  liberal  interest  upon 
deposits  of  all  classes. 

In  Massachusetts,  where  the  modem  trust  companies  have  had  a 
remarkably  successful  career,  an  attempt  has  been  made  on  the  i>art 
of  the  regular  banks  to  procure  the  enactment  of  a  law  compelling 
them  to  keep  on  hand  in  their  vaults  stronger  reserves,  of  a  character 
somewhat  similar  to  those  reqmred  of  the  National  banks  by  the  terms 
of  the  Bank  Act  under  which  they  hve  and  act.  In  making  this 
move,  the  point  was  taken  that  trust  companies  are  really  banks  with- 
out circulation. 

This  work  has  not  fof  its  mission  the  discussion  of  theories  or 
the  advancing  of  any  partisan  views  on  financial  matters,  and  for 
these  reasons  no  attempt  will  be  made  to  present  the  pros  and  cons  of 
this  exciting  trust  company  reserve  question.  Bankers  and  trust  com- 
pany managers,  who  wish  to  pursue  the  matter,  can  have  easy  access 
to  a  valuable  argument  in  favor  of  requiring  the  tnist  companies  to 
cany  heavier  home  reserves  Avhich  has  been  made  by  R.  D.  Smith, 
Esq. ,  of  Boston,  and  which  has  been  published  in  a  pampldet ;  and 
they  can  as  easily  reach  the  printed  reply  to  the  Smith  argument  made 
by  an  able  financier,  who  is  the  manager  of  a  large  trust  company. 

In  States  where  statutes  provide  that  grace  shall  prevail  on  time 
paper  other  than  checks  on  banks,  the  question  whether  a  trust  com- 
pany is  a  bank  according  to  the  statutes  becomes  one  of  importance. 

It  has  not  been  held  by  these  Massachusetts  authorities  that  these 
companies  are  banks  in  the  eye  of  the  law  covering  the  question  of 
grace  and  other  points,  though  they  possess  many  of  the  functions  and 
privileges  of  banks. 

Trust  companies,  therefore,  have  as  much  right  to  take  grace  as 
individuals  or  corporations  other  than  banks. 

Trust  companies  have  greatly  increased  in  numbers  and  business 
within  the  last  ten  years,  and  the  leading  companies  of  our  times  are 
strong  and  well-managed  institutions;  and  they  have  made  consider- 
able money,  in  most  eases,  for  the  fortunate  shareholders  of  their 
comparatively  small  capitals.  As  the  leading  trust  companies  are 
to  day  doing  an  immense  banking  business  of  one  class  at  least — that 
of  paying  daily  a  vast  number  of  customers'  checks  upon  their  deposits 
— it  appears  every  way  desirable,  looking  at  the  matter  from  a  public 
standpoint,  that  they  should  settle  through  clearing  when  they  are 
located  in  Clearing-House  cities.  Under  the  out-of-cleai'ing  method 
of  cashing  checks  (drafts,  the  trust  companies  persist  in  terming 
them)  the  messengers  of  banks,  who  are  the  largest  collectors  of  these 
checks,  .and  the  general  public,  into  whose  hands  many  of  them  pass, 
are  put  to  a  vast  amount  of  trouble,  which  is  all  obviated  where 
tlie  cliecks  of  trust  companies  are  made  chargeable  tlirough  the 
Clear  i  ng-House. 

The  present  relations  of  the  large  trust  companies  to  the  National 


TRUST    COMPANIES.  381 

banks  in  our  Clearing-House  cities  are  of  such  an  important  character 
that  they  are  of  a  good  deal  of  interest  to  the  financial  observer.  Out 
of  the  connection  there  may,  under  some  circumstances,  be  a  develop- 
ment of  no  little  financial  trouble. 

These  trust  companies  scatter  among  the  National  banks  around 
them  (those  banks  tliat  are  willing  to  pay  a  liberal  interest  upon  large, 
round  demand  deposits)  such  of  their  resoiirees  as  are  accumulating 
on  their  hands  awaitmg  investment,  or  funds  which  they  do  not  deem 
it  pnident  to  place  beyond  their  immediate  reach.  In  times  of  great 
stringency — of  panic — these  trust  balances  must  be  suddenly  reduced 
at  the  very  time  when  they  are  most  needed  "by  the  banks,  as  this  is 
always  the  case  with  demand  deposits.  The  control  of  the  balances  in 
question  may,  it  is  often  urged,  be  in  the  end  a  source  of  danger  to  the 
National  banks,  since  in  their  presence  lies  a  temptation  to  undue 
extension  of  bank  time  loans. 

It  has  been  said  that  the  "success  of  the  leading  American  trust 
companies  has  been  most  marked.  This  success  was  a  result  of  the 
adoption  of  ideas  and  methods  which  had  their  origin  in  England.  Our 
great  trust  companies  are^  in  their  most  important  features,  like  tlie 
jomt-stock  banks  of  London.  They  have,  like  them,  a  way  of  doing 
an  immense  business  on  a  small  share  capital.  The  writer  found  the 
great  joint-stock  banks  of  London  carrying,  on  the  average,  lines  of 
deposits  equal  to  about  ten  times  their  capital,  and  making  out  of  this 
wholesale  business  of  buying  and  selling  vast  amounts  of  money  most 
enormous  dividends  for  their  .fortunate  shareholders. 

Already,  in  this  volume,  has  been  given  in  detail  London  dividend, 
capital  and  deposit  figures.  Here  with  the  trust  companies,  as  there 
with  the  London  banks,  "  large  ales  and  small  profits  "  has  proved  a 
very  successful  motto  in  the  two  classes  of  banking  under  discussion. 

Wishmg  to  give  in  detail  some  clear  idea  of  the  way  trust  companies 
work — an  explanation  of  tmst  company  methods  of  machinery — let  us 
take  for  explanatory  illustration  a  view  of  one  of  the  best  and  most 
successful  of  the  trust  organizations.  It  has  a  capital  of  $500,000  and 
deposits  of  over  $12,000,000: 

This  company  is  authorized  to  receive  and  hold  moneys  and  property  in  TRUST 
and  on  deposit  from  Courts  of  law  or  equity,  executors,  administrators,  assignees, 
guardians,  trustees,  corporations,  and  individuals,  AND  MAY  BE  APPOINTED  BY 
PROBATE  COURTS  TRUSTEE  UNDER  ANY  WILL,  UPON  SUCH  TERMS 
AND  CONDITIONS  AS  MAY  BE  AGREED  UPON. 

It  is  by  law  made  a  legal  depository  of  money  paid  into  Court  by  the  parties  to 
any  legal  proceedings,  or  which  n\ay  be  brought  into  Court  by  reason  of  any  order  or 
judgment  in  equity  or  otherwise. 

It  will  act  as  TRUSTEE  OF  MARRIED  WOMEN,  and  take  charge  of  and 
manage  their  separate  property. 

It  offers  to  the  public  the  advantages  of  a  guarantee  capital  of  half  a  million 
dollars,  specially  invested  by  requirement  of  its  chaiter,  AND  A  PERPETUAL 
SUCCESSION. 

It  also  acts  as  TRANSFER  AGENT  FOR  RAILROAD  and  OTHER  STOCK 


382  PRACTICAIi    BAJS'KING. 

CORPORATIONS,  and  as  agent  for  the  purpose  of  issuing,  registering  or  counter- 
signing the  certificates  of  stock,  bonds,  or  other  evidences  of  debt,  and  for  the 
pajTnent  of  dividends  and  interest  of  corporations,  associations,  imiuicipalities,  State 
or  public  authority,  and  also  as  agent  or  attorney  for  the  cai-e  and  management  of 
invested  property,  and  for  the  collection  of  dividends  and  interest. 

DEPOSITS  may  be  made  at  any  time,  and  INTEREST  will  be  allowed  on  daily 
balances  of  $500  and  upward. 

The  company  reserve  the  right  at  any  time  to  change  the  rate  of  interest  allowed 
on  deposits. 

In  the  naanagement  of  its  deposit  business,  here  are  a  few  points : 

All  deposits  made  later  than  one  o'clock  are  placed  on  interest  the  next  business 
day. 

It  pays  3  per  cent,  on  demand  deposits  of  over  $500,  reserving  the  right  to  require 
five  days'  notice  for  pajinents  of  $20,000  and  upwards  on  any  one  day. 

On  deposits  made  for  a  specified  period  of  sis  months  or  more,  it  makes  special 
rates. 

All  deposits  must  be  accompanied  by  a  memorandmn  describing  the  items 
separately. 

Interest  not  allowed  on  temporary  deposits  if  drawn  in  thirty  days. 

It  particularly  requests  that  checks  and  drafts  not  on  banks  in  its  own  city  should 
be  deposited  by  one  o'clock  or  earlier,  so  that  they  may  be  forwarded  for  collection 
the  same  day. 

Office  hours,  10  o'clock  imtil  2  o'clock. 

In  tlie  matter  of  its  investments,  here  are  provisions  of  its  act  of 
incorporation  and  by-laws: 

It  shall  bo  lawful  for  said  corporation  to  invest  its  capital  and  all  the  moneys 
entrusted  to  it,  or  in  any  way  received  by  it,  in  the  authorized  loans  of  the  United 
States,  or  of  any  of  the  New  England  States,  or  cities  or  towns  of  this  Commonwealth ; 
in  the  stock  of  National  banks  organized  within  this  Commonwealth ;  in  the  first 
mortgage  bonds  of  any  railroad  company  which  has  earned  and  paid  regular  ch\idcnds 
for  two  years  next  preceding  such  investment,  or  in  the  "bonds  of  any  such  railroad 
company  as  is  unincumbered  liy  mortgage,  or  in  the  stock  of  such  railroad  companies 
incorporated  by  this  State ;  and  the  said  corporation  may  make  loans  upon  mortgages 
on  real  estate  within  this  Commonwealth,  or  upon  the  notes  of  corporations  created 
under  the  laws  of  this  Commonwealth,  and  the  notes  of  mdi\iduals  wth  a  sufficient 
pledge  as  collateral  of  any  of  the  aforesaid  securities ;  but  all  real  estate  acquired  by 
foreclosure  of  mortgages,  or  by  levy  of  execution,  shall  be  sold  at  public  auction 
witliiii  two  years  of  such  foreclosure  or  le^y. 

It  shall  be  lawful  for  the  said  corporation  to  invest  its  capital,  and  all  moneys  licld 
by  it  in  trust,  in  the  authorized  loans  of  any  of  the  counties,  cities  or  towns  in  any  of 
the  New  England  States,  or  to  loan  the  same  to  this  Commonwealth,  or  to  any  county 
city  or  town  therein  ;  and  said  corporation  may  also  invest  such  capital  and  moneys 
in  any  other  securities  in  which  Savings  banks  now  are  or  hereafter  may  l)e  allowed  to 
in\est,  and  shall  be  subject  to  and  governed  by  the  provisions  concerning  Savings 
banks  which  are  contained  In  the  General  Statutes. 

DIRECTORS. 

The  Board  of  Directors  shall  consist  of  a  President,  three  Vice-Presidents,  and 
fifteen  Directors,  who  shall  be  chosen  annually  by  the  sto<.-kholdcrs,  by  ballot,  and 
who  shall  continue  in  office  until  others  are  chosen  in  their  stead. 

The  actuary  shall,  ex  officio,  l>e  a  member  of  tlie  Board  of  Directors. 

Vacancies  during  the  year  shall  be  filled  by  election  by  the  Board  of  Directors. 

The  Board  of  Directors  shall  appoint  an  Actuai-y,  a  Secretary,  and  such  Clerks  as 
they  shall  from  time  to  time  tliiuk  necessary,  who  shall  respectively  hold  tlicir  offices 


TRUST    COMPANIES.  383 

until  removed  by  the  Board  of  Directors.  They  shall  also  determine  the  powers  and. 
duties  of  the  officers  of  the  corporation,  fix  all  salaries,  and  take  such  bonds  or  other 
securities  from  any  officer  as  they  see  fit. 

The  Board  of  Directors,  by  themselves,  or  by  committees,  shall  have  the  general 
management,  control  and  direction  of  all  the  business  concerns  and  affairs  of  the  cor- 
poration, and  of  all  its  trusts  and  undertakings,  with  full  power  to  make  all  investments 
and  to  transfer  all  real  and  personal  property  belonging  to  or  in  the  charge  or  control 
of  the  corporation  at  their  discretion. 

They  shall  have  power  to  declare  all  dividends,  determine  upon  the  form  of  certi- 
ficates of  stock,  and  of  transfers  thereof,  and  upon  a  corporate  seal ;  do  all  other  things 
which  by  law  or  the  statutes  of  this  Commonwealth  the  Directors  of  moneyed 
corporations  are  or  may  be  authorized  to  do  ;  and,  generally,  to  do  any  and  every  thing, 
not  repugnant  to  the  charter,  which  they  may  deem  fit  and  proper  to  use  and  carry 
into  effect  the  powers  of  the  company. 

There  shall  be  a  meeting  of  the  Directors,  for  the  transaction  of  business,  once  in 
every  month,  and  as  much  oftener  as  it  may  be  found  necessary  ;  a  quorum  of  said 
Board  shall  consist  of  not  less  than  seven  members. 

CAPITAL  STOCK. 

Any  member  of  this  corporation  who  shall  be  desirous  of  selling  any  of  his  shares, 
the  executor  or  administrator  of  any  member  deceased,  and  the  grantee  or  assignee 
of  any  shares  sold  on  execution,  shall  cause  such,  their  shares  respectively,  to  be 
appraised  by  the  Directors,  which  it  shall  be  their  duty  to  do  on  request,  and  shall 
thereupon  offer  the  same  to  them  for  the  use  of  the  corporation,  at  such  appraised 
value ;  and  if  said  Directors  shall  choose  to  take  such  shares  for  the  use  of  the  corpo- 
ration, such  member,  executor,  administrator  or  assignee  shall,  upon  the  payment  or 
tender  to  him  of  such  appraised  value  thereof,  and  the  dividends  due  thereon,  transfer 
and  assign  such  share  or  shares  to  said  corporation :  pro\ided,  however,  the  said 
Directors  shall  not  be  obliged  to  take  such  shares  at  the  appraised  value  aforesaid 
unless  they  shall  think  it  for  the  interests  of  the  company ;  and  if  they  shall  not, 
within  ten  days  after  such  shares  are  offered  to  them  in  writing,  take  the  same,  and 
pay  such  member,  executor,  admiriistrator  or  assignee  therefor  the  price  at  which  the 
same  shall  have  been  appraised,  such  member,  executor,  administrator,  or  assignee 
shall  be  at  liberty  to  sell  and  dispose  of  the  same  shares  to  any  person  whatever. 

It  shall  be  the  duty  of  such  executor,  administrator,  grantee  or  assignee  to  offer 
said  shares  for  appraisal  and  to  be  taken  by  the  corporation,  if  it  shall  so  elect,  when- 
ever requested  by  the  Actuary  or  Secretary,  and  no  dividends  or  interest  shall  be  paid 
or  allowed  after  a  failure  to  comply  with  such  request :  provided,  that  such  request 
shall  not  be  made  until  after  the  payment  of  one  di\'idend  and  the  expiration  of  six 
months  from  the  death  of  the  o^\^le^,  or  sale  as  aforesaid  ;  but  the  offer  may  be  made 
at  any  earlier  period  if  the  party  shall  prefer. 

The  Directors  shall  have  the  power,  and  it  shall  be  their  diity,  to  sell  and  dispose 
of  the  shares  which  may  be  transferred  as  aforesaid  to  the  corporation,  whenever,  in 
their  judgment,  it  can  be  done  with  safety  and  advantage  to  the  corporation  ;  and  in 
all  sales  made  by  the  Directors,  under  any  of  the  aforesaid  provisions,  it  shall  be  their 
duty  to  sell  the  shares  to  such  persons  as  shall  appear  to  them,  from  their  situation 
and  character,  most  likely  to  promote  confidence  in  the  stability  of  the  institution ; 
no  greater  number  than  one  hundred  shares  being  assigned  to  any  one  person  ;  nor, 
in  the  case  of  a  person  already  a  member,  a  greater  number  than  will  be  sufficient  to 
increase  his  previous  number  to  one  hundred  shares. 


384  PRACTICAL    BAXKIXG. 


CHAPTER    XXVI. 

THE    SUFFOLK    BANK    SYSTEM. 

I  have,  in  previous  chapters,  made  occasional  alhision  to  this  old- 
tiiue  foreign  money  redemption  system, — a  system  which  to-day  has,  to 
a  very  great  extent,  its  countei-part  in  the  National  Bank  Redemption 
Bureau  at  Washington.  The  Suffolk  system  was  of  a  very  simple 
character.  I  was  for  many  years  a  part  of  it,  as  it  were,  for  I  was  an 
officer  in  the  Suffolk  at  the  time  when  its  redemption  business  was  at 
the  flood,  and  I  am  therefore  able  to  speak  understandingly  of  the 
matter.  Its  system  was  this :  It  undertook  to  redeem  in  specie  or  its 
equivalent,  whatever  bills  of  the  banks  of  New  England  were  presented 
at  its  counters.  To  be  able  to  make  these  par  redemptions  it  required 
of  every  bank  in  New  England  deposits  of  two  types.  First,  the  biU- 
issuing  banks  were  required  to  keep  with  the  Suffolk,  cuiTent  balances 
sufficient  to  face  the  incoming  redemptions.  Second,  these  banks  were 
also  obliged  to  keep  with  the  Suffolk,  a  permanent  deposit  of  about 
three  thousand  dollars  cash,  upon  which  the  Suffolk  paid  no  interest, 
and  which  deposit  was  in  the  nature  of  a  compensation  for  doing  this 
redemption  business.  There  were  three  or  four  hundred  of  these  New 
England  banks  which,  when  the  Suffolk  system  was  at  its  highest  tide, 
were  keeping  with  the  Suffolk  Bank  these  permanent  deposits  and 
thus  giving  it  more  than  a  million  dollars  steady  deposits  upon  which 
it  could  bank,  discount,  etc.  Then,  on  the  current  accounts  with  these 
depositing  banks,  the  daily  balances  often  footed  up  another  million  or 
so  upon  which,  also,  no  interest  was  paid. 

An  additional  source  of  revenue  was  found  in  its  system  of  deferring 
credits.  It  had  a  practice  of  crediting  all  remittances  received  from  its 
corresponding  banks  a  day  later  than  their  receipt.  Out  of  its  connec- 
tion with  the  country  banks — a  reciprocal  account  connection — there 
g^ew  a  very  heavy  collection  business,  upon  which  it  also  made  large 
profits.  These  are  the  main  credit  points  of  the  Suffolk  system— the 
sunny  side  of  the  business. 

Here  are  what  may  be  termed  the  debit  views  of  tlie  Suffolk 
metliods  and  machinery.  The  labor  and  costs  of  working  up  the 
Suffolk  system  to  a  paymg  business— to  a  successful  standpoint,  were 
enormous.  There  were  banks  which  long  refused  to  redeem  their 
notes  at  par  at  the  Suffolk,  and  these  resisting  banks  had  to  be  forced 
into  line  by  the  tedious  and  expensive  process  of  sending  home  their 
circulating  notes  for  redemption  in   coiii  over  their  own  counters, 


THE    SUFFOLK    BA>'K   SYSTEM,  385 

which  coin,  when  collected  by  the  agents  of  the  Suffolk  Bank,  had  to 
.be  carried  home  to  that  bank  by  slow  and  costly  lines  of  carriage,  by 
stage-coach  or  private  conveyance.  There  were  pugnacious  banks 
which  resisted  to  the  very  last  extremity  what  they  termed  the 
over-beariug  tyranny  of  the  Suffolk,  tiirowing  in  its  path  every 
obstacle  ingenuity  could  suggest. 

Just  about  fifty  years  ago,  the  late  William  Lawrence,  of  honored 
memory,  in  company  with  a  gentleman  now  living,  and  enjoying  in 
his  old  age  the  love  and  respect  of  all  who  know  him,  started  in  their 
own  private  carriage  on  a  redemption  visit  to  State  banks  located  at 
Salem,  Newburyport  and  Portsmouth,  which  had  refused  to  come 
gracefully  into  the  traces  of  the  Suffolk  system.  These  gentlemen 
were  the  early  Dh-ectors  in  the  Suffolk,  and  they  carried  in  their  coach 
bags  of  coimtry  bank  bills,  upon  which  they  demanded  and  received 
the  standard  coin  of  the  day,  which  they  in  person  brought  back  and 
delivered  to  the  Cashier  of  the  Suffolk.  On  their  journey  they 
traveled  to  the  West  as  far  as  Groton,  and  there  enjoyed  the  old- 
fashioned  hospitality  of  the  Lawrence  mansion  in  that  town.  Thirty 
years  later  the  Suffolk  was  redeeming  a  million  of  country  bills  a  day, 
and  the  bulk  of  a  good  day's  work  was  many  bushels  of  small  State 
bank  notes.  Around  a  Cashier's  desk  a  crowd  of  coming  and  going 
expressmen  were  to  be  seen,  loaded  with  huge  packages  of  the  nicely 
sealed  country  bank  notes. 

When  I  first  entered  the  Suffolk  the  large  attics  of  its  building  were 
overflowing  with  boxes  of  all  sizes  and  shapes,  which  had  been  used  in 
the  transportation  of  silver,  large  and  small,  that  had  been  wilfully 
forced  upon  the  Suffolk  Messengers  in  redemption  of  notes  by  them 
presented.  Many  of  these  boxes  rattled  with  counterfeit  remnants  of 
invoices  of  this  silver — base  coin  which  had  been  passed  upon  the 
Messengers.  And  when  the  Suffolk  system  was  sohdly  estabUshed,  its 
conduct  required  an  immense  force  of  clerks,  a  costly  plant,  and  was 
of  a  character  involving  such  responsibilities  that  again  and  again  the 
Suffolk  broached  the  subject  of  tlu*owing  up  the  whole  thing — but  this 
was  mainly  in  those  days  of  discouragement  when  their  profits  were 
being  undermined,  and  their  care  and  work  immensely  increased  by 
mysterious  defalcations  in  the  foreign  money  department.  The  country 
money  defalcations  at  the  Suffolk  were  of  a  type  of  character  well 
depicted  by  the  following  story  of  trouble  and  loss  there : 

It  was  when  there  were  nearly  a  hundred  clerks  in  the  foreign 
money  department  of  the  Suffolk,  and  the  redemptions  were  averaging 
about  a  million  dollars  a  day.  These  redeemed  bills,  which  were 
largely  made  up  of  notes  of  small  denominations,  had  to  pass  through 
the  mill  tliree  times.  First  they  were  counted  in,  next  they  were 
assorted  by  their  banks,  lastly  they  were  counted  into  packages  and 
finally  strapped  and  labelled.  There  were  many  days  when  the  work 
would  extend  far  into  the  night,  and  few  days  when  the  hours  of  the 


3?6  PRACTICAL   BAXKIXG. 

department  were  less  than  from  eight  to  eight.  Thei-e  came  a  time 
(luring  tliis  extreme  pressure  of  business  when  the  cash  of  this  redemp-* 
tion  department  began  to  report  itself  short  every  night — short  in  large 
amounts  running  from  hundreds  to  thousands.  Recounts,  in  the  weary 
Avork  of  searching  for  the  deficiencies,  became  a  thing  of  almost  daily 
occurrence  and  would  extend  very  late  into  the  night.  There  was  no 
possibility  of  closely  locating  the  variations,  for  the  hands  of  the  one 
hundred  clerks  were  all  in  one  basket.  Attempts  were  made  to  weed 
the  department  of  clerks  whose  habits  and  appearance  raised  suspicions 
of  their  faithfulness.  The  most  rigid  inspection  of  the  out-of-bank 
ways  of  life  of  the  officers  was  instituted,  and  when  this  close  espionage 
developed  any  facts  which  seemed  to  tell  against  a  man,  he  was  quietly 
asked  to  resign  his  position.  But  the  outcome  continued  as  before — 
night  after  night  the  short  cash  would  face  the  worried  managers. 
Somehow  or  other  the  department  pulled  through  these  days  of  trouble 
and,  in  time,  began  to  run  along  more  smoothly.  When  the  events  of 
these  days  of  woiTy  had  become  simply  an  unpleasant  memory  there 
came  an  explanation  of  the  mystery  connected  with  them.  A  man  who 
had  worked  as  counter  during  the  period  in  question,  and  who  had 
never  been  even  suspected  of  irregularities,  sent  word  to  the  Directors 
of  the  bank  from  his  sick  bed,  where  he  lay  near  his  end,  that  he  had 
been  the  guilty  officer — the  money-counter  who  had  abstracted  the 
missing  funds.  He  asked  forgiveness.  There  was  nothing  to  do  but 
to  grant  it,  and  let  him  die  peacefully. 

Counterfeit  bank  bills  gave  the  Suffolk  a  deal  of  trouble,  and  no 
year  of  its  redemption  business  failed  of  reporting  large  losses  from 
the  receipts  of  fraudulent  paper  of  this  type.  The  banks  of  New 
England,  under  the  old  State  system  of  banlving,  were  in  the  habit  of 
issuing  circulating  notes  of  fine  execution — made  of  good  paper,  well 
engraved,  and  always  bearing  two  written  signatures ;  yet  somehow  or 
other,  the  counterfeiters  of  the  period  succeeded  wonderfully  well  in 
imitating  these  bills.  Here  is  one  of  these  old-time  counterfeits, 
which  was  so  well  executed  as  to  long  escape  detection.  I  can  easily 
recall  the  countenance  of  the  genuine  notes  of  this  Marine  Bank,  New 
Bedford — Joseph  Gunnell's  bank — and  can  testify  as  to  the  skillful 
way  in  which  this  fraudulent  note  was  gotten  up.  I  introduce  the  bill 
here  for  two  purposes — one,  for  the  object  of  showing  the  counterfeit 
dangers  the  Suffolk  had  to  encounter;  the  other,  for  the  purpose  of 
recalling  its  methods  of  dealing  with  discovered  counterfeits.  At  first 
the  Suffolk  was  in  the  habit  of  marking  upon  the  back  of  bad  bank 
bills  presented,  that  is,  the  counterfeit  and  altered  notes,  a  date  and 
an  initial  showing  the  time  when  they  were  condemned  by  the  Suffolk, 
and  what  clerk  discovered  their  fraudulent  character.  Thus  marked, 
the  bills  would  be  returned  to  the  depositors  from  whom  they  came. 
But  it  would  often  come  to  pass  that  these  rejected  notes  would  again 
get  into   circulation.     And  if  they  came  back  a  second  time  to  the 


THE    SUFFOLK   BANK   SYSTEM. 


387 


Suffolk,  the  marks  upon  their  backs  would  at  once  "betray  to  the 
initiated  the  name  of  the  party  who  had  passed  them  off  knowing  that 
they  were  not  genuine. 

"When  these  * '  careless  "  persons  were  confronted  with  the  facts  of 
their  discreditable  course,  they  would  redeem  the  notes  but  would 
generally  declare  that  they  must  have  sUpped  out  of  their  hands 
accidentally.  To  avoid  disagreeable  complications  of  this  character 
recourse  was  had  to  legislation  and  a  law  was  enacted  obliging  the 
Suffolk  Bank  to  brand  in  an  uneradicable  manner  every  fraudulent 
bank  bill  it  got  hold  of.  Under  tliis  law  the  Suffolk  set  up  a  system  of 
burning  into  every  condemned  note  with  an  iron  brand  and  black, 
thick  ink,  the  words  "counterfeit"  or  "  altered  "  as  the  cases  might 
domand,  with  the  added  initials  W.  G. .  for  "William  Grubb,  the  venera- 
ble head  of  the  Suffolk  department  of  redemption.  Bills  thus  treated 
eou.ld  travel  no  more.  Depositors  were  often  vexed  to  find  such 
disfigured  bank  notes  returned  to  them,  but  they  had  to  accept  the 
situation.  Here  is  the  bill  to  which  I  have  alluded — a  curious  relic, 
nearly  thirty  years  old. 


Under  the  Suffolk  Bank's  redemption  system  corresponding  banks 
whose  bills  they  were  redeeming  and  whose  accounts  they  were  keep- 
ing, were  allowed  to  overdraw  on  payment  of  the  then  standard  rate 
of  6  per  cent. ,  if  their  credit  and  standing  were  good.  But  in  times 
of  great  stringency  these  overdrafts  would  become  so  large  in  the 
aggregate  as  to  be  an  immense  strain  upon  the  resources  of  the  Suffolk. 
At  such  periods  of  closeness  resort  would  be  had  to  the  most  pressing 
appeals  to  delinquent  banks  to  pay  up.  And  when  these  dunning 
letters  ceased  to  be  effective,  when  it  seemed  as  if  a  bank  was  getting 
hopelessly  behind  in  meeting  its  j-edemptions,  the  Suffolk  would  stop 
returning  its  bills  redeemed  and,  finally,  if  the  case  grew  desperate, 
stop  redeeming  them  altogether.  In  the  latter  case,  the  first  move 
was  to  send  a  notice  to  the  Boston  papers  of  this  ominous  cliaracter : 
"The  bills  of  the  Sandown  Bank,  Sandown,  N.  H.,  are  no  longer 
redeemed  at  the  Suffolk  Bank. '"  A  circular  to  the  same  effect  was  then 
sent  to  aU  the  Suffolk's  corresponding  banks,  and  it  must  be  under- 


388  PRACTICAL  BANKING. 

stood  that,  after  such  a  notice,  the  Sandown  Bank  would  find  it  pretty 
hard  work  to  keep  out  its  ch-culation  or  get  out  any  more,  for  nobody 
who  did  not  personally  know  the  bank  would  touch  its  bills,  except  at 
a  discount,  until  the  Suffolk  had  reinstated  it.  I  well  remember 
periods  of  financial  depression  and  panic  when  notices  of  this  sort 
would  crop  out  at  the  rate  of  two  or  three  a  day. 

The  diiuensions  of  the  country  bank  overdrafts  at  the  Suffolk  were 
sometimes  very  startling.  The  Merchants'  Bank,  Providence,  which 
was  a  little  "  Suffolk  Bank  "  for  Rhode  Island,  at  one  time  ran  its  red 
mk  figures — its  overdrafts — up  to  a  million.  But  in  this  case  of  the 
Merchants'  as  in  other  of  the  Suffolk's  cases  of  advancing  money  to  the 
country  banks,  it  generally  had  in  hand  a  security  of  a  high  class  value 
m  the  shape  of  the  collections  belonging  to  the  overdrawers,  upon 
which  it  claimed  to  have  a  good  lien.  The  Suffolk  was  always  very 
patient  with  overdrawing  banks,  and  never  failed,  in  times  of  monetary 
pressure,  to  extend  all  the  help  to  its  hard-pressed  coiTesponding 
country  banks  which  its  resources  would  allow,  as  long  as  its  confi- 
dence in  the  integrity  and  general  soundness  of  these  debtor  banks 
was  unimpaired.  But'  it  was,  of  course,  its  fate  to  be  sometimes 
deceived  in  its  estimate  of  banks  which  were  seeking  accommodation, 
and,  as  a  consequence,  to  suffer  therefrom.  Occasional  out-and-out  and 
most  disastrous  failures  of  New  England  banks  whose  bills  were  being 
currently  redeemed  by  the  Suffolk  and  whose  accounts  current  were 
kept  with  that  institution,  brought  heavy  losses  upon  the  Suffolk  Bank. 

The  story  of  a  single  experience  of  the  Suffolk  Bank  with  a  rotten 
New  England' bank'will  illustrate  this  phase  of  its  trials  1  am  describing. 

The Bank  was  located  above  the  White  Mountains  of  New 

Hampshire.  It  had  long  kept  a  very  slow  account  with  the  Suffolk — 
had  for  years  just  managed  to  keep  its  bills  good  at  this  redemption 
agency  in  State  street.  There  came  a  period  when  its  circulating  notes 
seemed  to  be  pouring  in  upon  the  Suffolk  more  rapidly  than  usual, 

while  at  the  same  time  the  remittances  from  this Bank  became 

more  and  more  scant  and  infrequent.  But  what  was  missing  in  cash 
seemed  to  be  made  up  in  most  flattering  promises — promises  so 
plausible  and  earnest  that  the  Suffolk  Bank  kept  on  redeeming  its 
notes  till  it  was  debtor  to  the  Suffolk  to  the  amount  of  about  ^15,000, 
a  sum  for  Avhich  the  Suffolk  had  nothing  to  show  but  the  redeemed 

bank  notes.     It  was  at  the  time  when  the  connection  with  this 

Bank  beyond  the  mountains  had  taken  on  this  serious  aspect  that  I 
was  sent  by  the  Suffolk  to  see  what  I  could  do  with  the  delinquent — 
sent  with  the  $15,000  redeemed  bills  packed  in  a  vjilise,  to  hunt  up 
the  debtor  bank  and  collect  the  money  upon  the  bills,  or  obtain  some 
security  for  the  overdraft.  A  long  and  tedious  journey  in  mid-summer, 
by  rail  and  stage,  carried  me  to  the  town  where  the  embarrassed  bank 
was  located.  Before  I  reached  the  place,  I  gathered  from  incidental 
talk  with  fellow-travelers,  who  knew  nothing  of  my  character  or 


THE    SIFFOLK    BANK    SYSTEM.  389 

errand,  that  the  bank  I  was  seeking  had  for  a  long  time  been  a 
scandal  in  all  the  country  around  about  it — had  not  been  deemed 
worthy  of  the  slightest  confidence  for  years.  The  only  place,  they  said, 
where  its  credit  had  been  good  for  anything  was  at  the  counters  of  the 
Suffolk,  Boston,  to  which  they  always  sent  all  its  bills  for  redemption 
whenever  they  got  hold  of  them.  On  reaching  the  sought-for  bank,  I 
found  it  in  the  hands  of  the  State  Bank  Commissioner,  who  had 
finally  scented  out  its  condition  and  taken  possession  of  it  just  before 
my  arrival.  The  Cashier,  a  man  of  little  business  capacity  and  of 
very  intemperate  habits,  who  had  had  entire  charge  of  the  bank, 
had  absconded.  Its  room  was  shut.  There  was  little  in  it  of  any 
value  but  an  old  safe.  All  its  available  assets,  if  it  ever  had 
any,  had  disappeared.  In  its  pigeon  holes  were  no  more  valuable 
papers  than  past  due,  worthless  notes,  and  accounts  and  letters 
from  the  Suffolk  Bank.  The  man  who  sent  his  hat  around  among 
an  impecunious  crowd  for  a  contribution  which  he  did  not  get, 
said  he  was  glad  to  even  get  his  hat  back.  I  was  glad  to  be  able  to 
get  back  after  a  time  to  the  Suffolk,  from  my  collecting  tour,  with  the 

bank  bills  with  which  I  had  started.     In  the  end  the Bank,  of 

which  I  am  writing,  paid  a  trifling  dividend. 

The  Suffolk  Bank  system  of  New  England,  a  system  which  had 
become  a  perfect  success,  and  which  had  made  its  name  knowTi  in 
financial  circles  of  all  lands,  was  born  amid  stirring  financial  contests, 
and  had  to  struggle  hard  at  the  outset  for  an  existence.  It  died  very 
quietly.  The  bank  which  gave  a  name  to  the  system  reaped  a  good 
reward  for  its  labors.  It  paid  heavy  and  regular  dividends  for  a  long 
period,  and  became  so  strong  and  so  solid  an  institution,  that  "as 
good  as  the  Suffolk  Bank  "  became  a  proverb.  Its  bills  enjoyed  a  wide 
circulation,  for  they  were  looked  upon  as  types  of  reliability. 

The  wayfai'er,  in  Hawthorne's  story,  in  taking  a  bill  that  was 
tendered  to  him,  said  he  knew  it  was  as  good  as  the  gold  because  it 
was  a  bill  of  the  Suffolk  Bank.  The  Suffolk  paid,  when  it  merged  itself 
into  a  National  bank,  a  final  dividend  of  8138  a  share.  The  par  of  its 
shares  was  $100.  The  monopoly  which  it  had  so  long  held — the 
monopoly  of  the  management  of  the  foreign  money  system — was,  long 
before  the  establishment  of  the  National  system,  upset  by  the  onslaught 
of  J.  G.  Carney,  the  founder  of  the  National  Bank  of  Redemption. 
Mr.  Carney  was  a  most  indomitable  man — a  man  seemingly  made  to 
fight  successfully  what  he  termed  the  tyranny  of  the  Suffolk.  After  a 
long  and  a  severe  financial  contest,  the  Bank  of  Mutual  Redemption 
came  out  of  the  struggle  with  a  large  share  of  the  Suffolk's  business  in 
its  hands. 

Thenceforward  there  were,  up  to  the  day  of  the  setting  up 
of  National  banking,  two  "Suffolk  Banks''  in  Boston — two  redemp- 
tion banks,  each  holding  nearly  equal  shares  of  the  country  bank 
business.     And  to-day  the  National  Bank  of  Redemption,  a  solid  and 


390  PRACTICAL    BAXKIXG. 

well  managed  institution,  counts  as  its  best  hold  that  country  bank 
business  which  has  clung  to  it  from  the  days  when  it  fought  the 
Suffolk  Bank. 

lu  the  later  days  of  the  Suffolk  system  the  circulation  of  New 
England  bank  bills  became  very  large  in  New  York  city.  The 
Metropolitan  Bank  of  New  York  city,  started  under  the  management 
of  New  England  men — John  Earl  and  William  and  Henry  L.  Jacques 
— was  the  agent  of  the  Suffolk  Bank  in  that  city.  Its  daily  remittances 
to  the  Suffolk  of  New  England  bills  redeemed  were  very  heavy.  In 
those  days  the  Metropolitan  was  one  of  tlie  most  active  and  one  of 
the  best  managed  banks  in  New  York  city.  Its  ruin — its  downfall 
under  Seney — seemed  to  old  bankers  who  had  known  it  from  the  start, 
a  very  lamentable  and  most  disgraceful  thing. 

In  looking  back  over  the  history  of  the  rise,  progress,  and  final 
decline  of  the  Suffolk  system,  one  cannot  help  recurring  to  the  fact 
that  it  had  in  its  management,  first  and  last,  some  of  the  ablest  and 
most  faithful  bankers  New  England  has  ever  known. 

The  Suffolk  always  had  an  able  corps  of  workers  in  its  rank  and 
file,  and  there  graduated  from  this  corps  many  of  Boston's  present 
leading  bank  officers. 

At  the  time  of  the  establishment  of  the  National  Central  Redemption 
Bureau  at  Washington  the  advice  and  assistance  of  officers  who  had 
helped  to  conduct  the  business  of  the  Suffolk  was  sought  fvid  made 
very  helpful.  And  the  business  done  to-day  in  that  Bureau  is  only  a 
Suffoliv  Bank  business  of  larger  growth. 

Henry  B.  Stone,  at  the  head  of  the  Suffolk  in  its  early  days,  was  a 
banker  of  remarkable  skill  and  power. 

And  for  at  least  40  years  two  bank  Directors  whose  names  have 
ever  been  thoroughly  identified  with  the  Suffolk  Bank's  country  money 
business,  served  consecutively  on  its  chief  committee — the  committee 
on  the  foreign  money  department.  These  were  Jeffrey  Richardson  and 
John  A.  Lowell. 

Jeffrey  Richardson — a  gentleman  held  in  most  kindly  remembrance 
by  all  who  were  ever  brought  in  contact  with  him — was  a  fine  banktr  of 
the  old  school.  He  was  a  Director  of  the  Suffolk  for  nearly  55  years 
and  for  more  than  40  years  was  a  member  of  the  foreign  money  com- 
mittee of  the  bank — altogether  the  most  important  committee  in  the 
Board  of  Directors. 

While  serving  on  that  conuuittee,  and  also  in  the  more  conspicuous 
position  of  President  of  the  bank,  which  he  held  for  5  years,  he  showed 
a  skill,  a  patience  and  a  kindness  of  heart  that  won  the  respect  and 
esteem  of  the  clerks  under,  and  the  men  of  business  who  were  associ- 
ated with  him.  Early  in  life  he  had  been  an  active  merchant — a  large 
importer  and  dealer  in  iron — but  from  the  date  of  his  entry  into  the 
Board  of  the  Suffolk  Bank  up  to  the  day  of  his  death,  his  time  and 
attention  were  more  given  to  the  banking  business  than  to  trade  in  the 


THE    SUFFOLK    BAXK    SYSTEM. 


391 


old  store  on  Central  Wharf,  wliich  he  nominally  occupied  for  half  a 
century  or  so. 

When  it  became  evident  to  most  Massachusetts  bankers  that  the 
days  of  banking  under  State  charters  were  numbered  and  that  there 
was  no  alternative  for  the  old  State  banks  but  to  submit  to  Secretary 
Chase  and  be  nationalized.  Director  Richardson,  who  had  all  his  life 
been  identified  with  State  banking,  either  in  the  capacity  of  President 
or  Director,  could  not  be  convinced  of  the  wisdom  of  reorganizing  the 
Suffolk  Bank  under  the  National  system.  He  talked  against  it,  he 
A\Tote  against  it,  and,  alone  in  all  the  Board,  he  to  the  last  voted 
solidly  against  it,  because,  as  he  said,  he  never  approved  the  wisdom 
of  the  change.  Following  is  an  accurate  likeness  of  this  worthy  banker 
that  will  vividly  recall  to  many  a  reader  his  kindly  face  and  cheery 
presence : 


'/.   ^«   '.'/ 


Another  well-known  officer  was  Mr.  William  Grrubb,  and  any  detailed 
account  of  the  Suffolk  Bank  foreign  money  system  would  be  very 
imperfect  if  it  did  not  make  particular  mention  of  his  remarkably  long 
and  faithful  ser\aces  as  chief  clerk  or  Manager  of  the  Suffolk's  foreign 
money  department.  I  knew  this  gentleman  well,  having  been  for  18 
years  brought  in  close  connection  with  hirh  while  ser\ing  as  an  officer 
in  various  departments  of  the  Suffolk,  and  I  can  testify  that  he  was 
one  of  the  most  faithful,  patient  and  industrious  bank  officers  I  have 
ever  kno^vn. 

On  May  24,  1824,  he  entered  the  Suffolk  and  took  charge  of  its 
country  money  business — which  it  had  just  assumed  as  agent  of  the 
associated  banks  of  Boston.  Mr.  Grubb  received  a  salary  of  $60  a 
month,  with  one  assistant,  a  Mr.  White,  who  was  paid  850  a  month. 

Mr.  Grubb  died  in  May,  1862,  after  serving  as  principal  officer  of 
the  foreign  money  department  for  nearly  40  years. 

Early  in  his  career,  as  head  of  this  department,  a  contract  was  made 
with  him  that  he  should  assume  all  the  risks  of  the  business  as  far  as 


393  PRACTICAL    BANKING. 

losses  from  counterfeits  and  short  cash  were  concerned,  and  hire  all 
his  own  clerks.  Under  this  plan  liis  business  responsibilities  and  corps 
of  clerks  increased  until  he  had  nearly  eighty  men  under  him,  was 
counting  §1,000,000  a  day,  and  receiving  a  pay  of  $40,000  a  year. 

At  one  period  the  losses  of  the  Suffolk  foreign  money  department 
amounted  to  over  §10,000  in  a  single  year.  This  was  just  before  the 
bank  divided  up  the  department  into  several  separate  divisons,  each 
one  of  which  was  under  a  head  clerk. 

Here  is  an  accurate  picture  of  this  old-time  bank-officer : 


When  the  Suffolk  Bank  began  redeeming  and  sending  home  bills 
of  the  banks  of  New  England  there  were  no  express  organizations,  and 
the  money  packages  which  had  to  pass  to  and  fro  between  the  bank 
and  its  corresponding  country  banks  went  by  the  hands  of  private 
messengers,  stage-drivers,  etc. 

The  Gtage-drivers  who  were  connected  with  this  bank  business  have 
nearly  all  expired.  Once  in  a  while,  some  old  whip  turns  up  to  relate 
his  perilous  adventures  by  road  and  inns  with  those  old-time  bundles 
of  money  and  bags  of  coin  which  came  from  or  traveled  towards  the 
Suffolk  Bank  of  Boston.  Niles,  of  the  New  Hampshire  stage  lines, 
may  be  named  as  a  living  typical  representative  of  these  coach  drivers 

And  those  special  messengers  which  the  Suffolk  employed  in  the 
beginning  of  its  work  have  all  passed  away  with  the  single  exception 
of  the  venerable  Morse,  of  Sherburne.  Morse  was  succeeded  early  by 
a  man  known  among  the  country  banks  as  "Old  Wyman  of  the 
Suffolk."  His  messages  to  the  country  banks  were  often  of  an 
ungracious  character,  and  they  seldom  welcomed  his  advent  among 
them  with  his  stacks  of  their  bills  and  his  demands  for  specie. 

Wlien,  in  his  advanced  life,  IMr.  William  Wyman  gave  up  traveling 


THE    SUFFOLK    BANK    SYSTEM.  393 

for  the  Suffolk,  he  retired  to  a  coal  business  at  East  Cambridge  to  which 
he  had  been  helped  by  Suffolk  friends,  and  in  which  he  remained 
until  his  death. 

At  the  counters  of  this  bank  in  the  days  of  its  redemption  activity 
might  every  morning  be  seen,  signing  receipts  for  stacks  of  packages  of 
country  bank  bills,  those  well-known  pioneers  of  the  New  England 
express  business,  Alvan  Adams,  Col.  A.  D.  Hatch,  B.  P.  Cheney,  Fiske 
of  the  Vermont  lines  and  a  host  of  others  of  the  same  profession,  most 
of  whom  have  passed  away. 

Col.  Hatch,  still  full  of  activity,  can  justly  claim  to  rank  as  the 
oldest  living  express  messenger  in  New  England,  and  one  who  has  taken 
from  and  delivered  to  the  Suffolk  Bank  about  as  many  packages  of 
money  as  any  express  agent. 

Without  doubt  the  development  and  rapid  early  growth  of  the 
express  business  of  New  England  was  largely  due  to  the  carrying 
demands  created  by  the  Suffolk  system,  and  to-day  the  express  system 
and  railroads  have  entirely  taken  the  place  of  specie  messengers  and 
private  conveyances  ;  no  vestige  of  the  old  State  system  of  banking 
remains,  as  far  as  circulation  is  concerned ;  but  the  express  companies 
are  bringing  in  every  morning  to  the  National  banks  throughout  the 
country  their  issues  of  National  circulation,  redeemed  at  the  National 
"Suffolk  Bank"  at  Washington  and  to  be  accounted  for  to  that 
institution  without  delay. 

From  the  experiences  of  the  Suffolk  Bank  I  have  gathered  many 
anecdotes  which  I  have  given  in  the  preceding  pages.  I  venture  to 
close  this  chapter  with  still  another  which  I  think  I  have  not  yet  used. 

In  the  days  when  the  redemption  business  was  at  its  height,  the 
Cashier  of  the  Suffolk  once  delivered  into  the  hands  of  the  agent  of 

the  express  company  a  package  of  redeemed  bills  of  the Bank, 

which  were  to  be  delivered  at  once  to  that  bank,  and  which  were,  on 
delivery  to  the  said  express  agent,  charged  to  the  bank's  account. 
The  package,  wliich  was  duly  receipted  for  by  the  express  agent,  was 
a  bulky  one,  for  it  contained  some  thousands  of  dollars  of  small  bills. 
Tliis  ends  the  first  chapter  of  this  story.     At  the  close  of  the  month 

the  Suffolk  Bank  rendered  its  account  to  the bank,  upon  which 

stood  boldly  the  charge  against  the  bank  of  this  aforenamed  delivered 

package.     The bank,  on  examining  the  account,  reported  as  a 

discrepancy  this  charge  for  bills  redeemed  and  sent  home,  representing 
the  delivery  we  have  described,  for  they  said  they  had  never  received 
sneli  a  parcel.  The  express  agent  was  overhauled.  He  looked  at  his 
records  and  liis  receipt  for  the  bills  on  the  books  of  the  Suffolk  Bank. 
He  said  it  did  seem  as  if  he  took  that  missing  package  but  he  could 
not  imagine  what  had  become  of  it.  Here  the  mystery  began.  The 
matter  dragged  along  under  this  cloud  for  weeks.  Much  correspon- 
dence was  indulged  in  and  a  law-suit  was  imminent.  At  the  end  the 
whole  coutention  was  cleared  away  and  the  mystery  solved  by  the 


894  PRACTICAL,    BAXKI^'G. 

discovery,  by  the  express  agent,  of  the  lost  bills  in  a  sly  corner  of  the 
box  under  the  seat  of  his  express  wagon  where  the  package  had  been 
knocking  around  in  the  wagon  for  all  those  weeks. 

Of  course  matters  were  straightened  out  at  once,  but  had  the  express 
agent  been  particular  about  squaring  his  delivery  book,  or  the  Suffolk 
Bank  more  particular  about  checking  off  its  acknowledgments  for 
remittances  made  to  the  country  banks,  the  money  would  probably 
have  spent  that  time  in  a  safer  place  and  our  story  would  have  been 
much  shorter. 


EVEKYDAY    QUESTIONS    AND    OTHEK   MATTEKS.  395 


CHAPTER   XXVII. 

EVERYDAY    QUESTIONS    AND    OTHER    MATTERS. 

Banks  are  often  applied  to  for  charity  bestowments — voluntary 
contributions  to  tliis,  that,  and  tlie  other  benevolent  objects.  Such 
appeals  can  of  course,  only  reach  the  bank  through  its  Directors.  The 
Directors  are  merely  the  representatives  of  the  shareholders,  who  are 
really  the  bank.  Broadly  stated,  the  Directors  of  a  bank  have  no 
right  to  give  away  the  shareholders'  money.  They  were  not  delegated 
such  a  power  when  they  were  chosen  to  their  position.  They  were 
put  in  their  places  to  act  as  managers  of  the  stockholders'  capital,  and 
such  other  capital  as  might  chng  to  the  bank  in  the  way  of  deposits, 
circulation,  etc.,  and  to  manage  it  with  the  view  of  making  as 
much  profit  on  it  as  is  honestly  possible.  For  these  reasons  bank 
Directors  should  be  very  wary  about  voting  away  funds  of  the  institu- 
tion in  their  charge  in  response  either  to  the  calls  of  charity,  philan- 
thropy, or  patriotism.  Banking  capital  is  placed  in  the  ruts  of 
business  to  earn  money  in  doing  business.  Its  Managers  are  given  no 
discretionary  powers  which  can  be  construed  into  powers  to  make 
donations  other  than  those  which  may  be  deemed  to  be  in  spirit 
legitimate,  judicious,  business  investments — charity  prompted  by 
policy  and  prudence,  and  practiced  simply  because  th'e  best  judgment 
of  the  Board  of  Directors  gravitates  to  the  conclusion  that  the  bank 
will,  all  tilings  considered,  be  in  the  end  a  gainer  pecuniarily  by  the 
charity  investment. 

Of  such  a  character  are  votes  of  money  by  a  bank  to  help  along 
rebuilding  operations  in  a  fire-stricken  locahty,  which  is  covered  to  a 
large  extent  by  its  loans.  In  this  case  it  gives  away  shareholders' 
money  in  order  to  save  m'ore  money  for  them  by  helping  along  the 
staggering  debtors  of  the  bank.  It  is  easy  to  imagine  many  instances 
of  gi\'ing  similar  Id  (jharacter  to  this  one. 

In  time  of  war,  banks  may  legitimately  vote  to  donate  money  to 
help  in  the  work  of  the  self-preservation  of  their  Nation,  whose  ruin 
would  be  the  ruin  of  its  banks. 

Grants  of  money  to  disabled  employees  who  have  served  it  long 
and  faithfully,  and  who  are  found  to  be  in  need  when  no  longer  able 
to  do  duty,  come  within  the  category  of  gifts  properly  and  legitimately 
bestowed  by  a  bank.  For  action  of  this  character  is  good  banking — a 
part  of  its  legitimate  sy.stem. 

Charity  investments  of  this  description  on  behalf  of  the  shareholders 


396  PRACTICAL    BANKING. 

are  justified  on  the  true  ground  that  the  proper  recognition  and 
encouragement  of  the  men  who  are  in  responsible  positiojis  in  banks  is 
merely  a  measure  of  self-protection  and  strict  justice. 

But,  reverting  to  the  general  principles  svhicli  rule  in  the  premises 
before  us,  we  have  only  to  say,  finally,  that  bank  Directors  have  no 
bank  money  to  simply  give  away.  The  bank  money  is  the  property  of 
the  shareholders.  If  the  shareholders  wish  to  give  they  can  take 
money  out  of  their  individual  pockets. 

SMALL,   ACCOUNTS. 

Every  bank  has  upon  its  books  accounts  from  which  it  receives  no 
direct  profit.  Many  of  these  are  so  small  that  they  hardly  pay  for  the 
paper  upon  which  they  are  kept.  They  have  been  taken  on  for  various 
reasons;  the  most  common  reason  being  that  the  account  has  come  in 
such  a  shape  that  it  has  been  more  difficult  to  refuse  than  to  accept 
it;  and,  in  many  instances,  the  expectation  of  some  indirect  advantage 
from  keeping  them  has  had  something  to  do  with  their  acceptance. 
Tiiese  little  accounts  are  generally  personal,  and  it  will  be  noticed  that 
the  oldest  and  best  of  our  banks  generally  have  the  most  of  them,  for 
such  banks  have  the  widest  circle  of  personal  acquaintances. 

Recognizing  the  fact  that  there  must  always  be  large  numbers  of 
these  little  bank  accounts,  which  have  got  to  be  kept  by  somebody, 
the  question  of  what  shall  be  done  witli  them  is  the  one  that  must  be 
disposed  of. 

I  would  recommend  to  all  banks  to  take  all  of  the  respectable 
accounts  of  the  class  in  question  that  are  offered,  no  matter  how  small 
they  are  likely  to  be,  and  charge  a  commission  for  keeping  them.  A 
great  many  of  these  small  depositors  would  prefer  this  way  of  doing, 
for  it  would  place  them  upon  an  independent  footing. 

And  many  who  would  like  to  open  bank  accounts,  but  who  are 
deterred  from  so  doing  because  they  don't  like  to  place  themselves 
under  obligations  to  a  bank  for  doing  business  for  them  which  does 
not  pay,  would  open  accounts  if  there  were  some  aiTangements  for  their 
paying  a  pereenta-^e  upon  them,  to  cover  their  cost  and  as  a  fee  for 
banking  privileges. 

SPECIAL    DEPOSITS    OP    VALUABLES. 

The  Banking  Department  at  Washington  long  ago  took  the  ground 
that  the  National  banks  had  no  legitimate  right  to  encumber  them- 
selves with  the  labor  .and  responsibilily  of  storing  and  caring  for 
special  deposits  of  money,  bonds,  and  other  valuables,  belonging  to 
their  customers  ;  and.  as  a  consequence,  and  greatly  to  their  relief, 
most  of  the  National  banks  have  abandoned  this  sort  of  business,  and 
thereby  given  to  the  safe  deposit  companies  a  clear  field  for  their  work. 

Some  banks  have  set  up  special  safes  or  vaults,  in  which  their 
Directors  and  a  few  heavy  customers  are  allowed  lock  boxes  for  the 
storage  of  valuables;  but  this  is  a  custom  which  is  not  very  satisfactory 


EVERYDAY    QUESTIONS    AND    OTHER   MATTERS.  397 

either  to  the  bank  or  customers.  These  Directors'  vaults  afford,  it  is 
true,  free  safe  deposit  room,  but  it  is  not  deposit  room  which  has  such 
well-nigh  perfect  and  systematic  safeguards  as  our  first-class  safe 
deposit  companies;  neither  does  the  bank  which  furnishes  this  room 
assume  any  direct  responsibility. 

The  custom  of  the  banks,  which  once  so  generally  prevailed  here, 
of  keeping  store  rooms  for  their  dealers  is  of  London  origin.  London 
banks  have  done  this  sort  of  business  for  one  or  two  hundred  years. 
It  is  only  recently  that  the  public  safe  deposit  idea  has  obtained  there 
at  all.  And  the  only  safe  deposit  company  which  has  been  set  up  in 
that  city  has  never  paid  a  dividend,  and  has  received  light  patronage. 

The  London  banks  have,  so  far,  never  made  any  charge  for  the  use 
of  their  strong  rooms.  But  heavy  losses  from  them,  wliich  policy  has 
induced  them  to  make  good,  have  disgusted  them  with  the  business, 
and  they  are  now  proposing  to  give  up  the  business  or  make  a  charge. 

French  banks  never  take  charge  of  valuables  on  account  of  clients 
without  making  a  specific  charge  and  undertaking  complete  responsi- 
bihty  for  any  ordinary  loss  which  may  happen.  The  rate  charged  is 
about  4d,  per  £100  per  annum,  or  about  one  in  six  thousand,  and  is 
moderate  enough.  Now  and  again  the  banks  have  the  opportunity  of 
giving  notice  to  their  customers  that  the  latter  must  take  the  risks  of 
war — this  being  something  like  the  clause  in  marine  policies  which 
exonerates  the  underwriters  from  piracy,  war,  etc., — but  the  customers, 
on  the  whole,  obtain  real  security. 

NOT   RIGHT. 

There  is  a  bad  usage  in  banking  which  is  seldom  discussed — seldom 
condemned,  as  it  should  be — to  which  direct  reference  should  be  made 
in  any  treatise  on  practical  banking.  The  practice  we  here  have  in  view 
is  that  of  paying  private  commissions  to  Cashiers  and  other  leading 
officers  of  banks  for  securing  their  services  in  the  way  of  influencing 
purchases  and  investments  made  on  behalf  of  their  banks,  depositors, 
correspondents,  and  trusting  friends  and.  acquaintances  who  come  to 
these  officers  for  advice  in  regard  to  investments. 

It  is  an  every-day  occurrence  for  a  bank  Cashier — especially  if  he 
is  connected  with  a  large  bank  in  some  great  financial  centre — to 
receive  from  promoters  of  new  companies,  who  are  endeavoring  to 
float  the  stock  or  bonds  of  their  concerns,  or  from  brokers  and  dealers 
in  shares  and  bonds  and  money  investments  of  many  sorts,  circulars 
setting  forth  in  attractive  style  the  sure  and  profitable  character  of  the 
proposed  investments.  The  circulars  are  often  accompanied  by  a 
private  slip,  not  intended  for  eyes  other  than  those  of  the  Cashier,  and 
least  of  all  those  of  his  customers,  stating — and  here  we  copy  from  an 
actual,  working  circular  of  the  class  in  question,  the  last  one,  in  fact, 
that  I  received: 

lu  case  you  sliould  have  any  friends  who  would  like  to  invest  some  money  in  these 
mortgages  we  ^vill  pay  you  a  commission  of  2  per  cent,  on  all  money  which  you  send 


39y  PRACTICAL    BANKING. 

US  to  lend  for  other  parties.  "We  guarantee  satisfaction.  We  hope  you  will  consider 
this  proposition  favorably,  and  give  the  matter  a  part  of  your  time  with  the  result  of 
sending  us  some  fvmds  to  lend.  Should  there  be  any  points  on  which  you  desire 
further  information  we  wU  answer  your  inquiries.    Hoping  to  hear  from  you  soon, 

We  remain,  . 

The  investments  offered  by  this  circular  were  guaranteed  by  its 
signers  to  pay  8  per  cent,  net;  and  when  money  can  be  readily 
obtained  for  about  half  of  this  rate,  on  good  security,  the  conclusion 
must  be  reached  that  its  holdings  forth  must  be  at  least  a  little 
delusive. 

This  Cashier's  commission  business  often  assumes  another  phase. 
These  officers  are,  in  the  regular  course  of  their  business,  in  the 
discharge  of  legitimate  duties  for  which  they  have  been  retained  by 
their  banks,  often  called  upon  to  buy  and  sell  for  their  banks  and  its 
customers  and  occasional  correspondents,  securities  of  every  name  and 
nature.  The  bulk  of  business  of  this  character  has  to  be  done  by  them 
through  private  bankers  and  brokers.  In  such  buyings  and  sellings 
the  Cashier  is  sometimes  tendered  by  the  parties  with  whom  he  deals 
— the  brokers  and  bankers  from  whom  he  buys  or  to  whom  he  sells — 
a  commission  which  does  not  appear  on  the  surface  of  the  transaction. 
He  finds  no  mention  of  it  on  any  bills  of  sale  or  purchase,  yet  it  is 
quietly  offered  to  him  as  if  it  was  a  regular  thing  that  he  should  accept 
it.  If  he  does  so  he  places  himself  in  a  false  position — has  given  his 
countenance  to  an  objectionable  practice.  The  parties  for  whom  the 
buying  or  selling  is  done  know  nothing  of  the  charge;  for  the  bills  of 
sale  and  purchase  are  made  out  at  what  may  be  termed  the  long  prices 
and  not  the  net  ones.  The  bank  whose  officer  he  is  often  knows 
nothing  of  this  business,  for  it  appears  upon  no  record.  The  commis- 
sions in  question  really  come  out  of  the  "consumers" — the  parties 
for  whom  the  transactions  are  effected. 

Bankers  and  brokers,  who  are  dealing  with  Cashiers  whom  they 
know  they  must  divide  commissions  with,  cannot  in  the  long  run  make 
as  favorable  terms  with  them  as  with  Cashiers  who  will  not  accept 
such  "  influence  "  money. 

Many  a  bank  Cashier  who  has  ' '  gone  under  "  began  to  fall  by  first 
taking  the  steps  we  here  condemn. 

THE   RIGHT   TO   ISSUE   TIME   CERTIFICATES    OP    DEPOSIT. 

Such  issues  we  do  not  consider  in  harmony  with  the  principles  of 
sound  banking,  and  they  are  not  distinctly  provided  for  in  the  Bank 
Act  of  the  United  States.  They  have  never  been  directly  countenanced 
by  the  Banking  Department,  yet  it  must  be  stated  that  there  are  no 
distinctly  prohibitive  clauses  in  the  Revised  Statutes  of  the  United 
States  and  no  statutes  or  legal  decisions  under  those  statutes  that  have 
ruled  them  out.  National  banks  have  from  time  to  time  issued  time 
certificates,  and  some  are  to-day  doing  so.  The  existence  of  vouchers 
of  this  class  has  been  reported  to  the  Department,  and  they  have  often 


EVERYDAY    QUESTIONS    AXD    OTHER    MATTERS.  399 

figured  in  the  regular  returns  to  the  Comptroller,  yet  the  banks  making 
such  issues  have  not  been  proceeded  against  therefor  and  have  not 
been  suppressed  for  doing  business  of  this  character. 

Here  is  a  very  curious  fact  relative  to  this  matter.  The  Comptrollers 
of  the  Currency  in  the  past  have  pronounced  against  these  time 
certificates.  The  present  Comptroller  sets  his  face  against  them  when- 
ever questioned  on  the  matter.  Yet,  singularly  enough,  he  sends  out 
to  all  the  National  banks  of  the  United  States,  whenever  a  return  of 
condition  is  called  for,  an  official  blank  form  for  a  statement  in  detail 
of  condition,  which  contains  an  item  and  heading  under  which  time 
certificates  of  deposit  are  to  be  reported  where  they  exist  as  a  part  of 
the  deposits  of  the  bank. 

The  inconsistency  we  are  alluding  to  has  long  been  a  matter  of 
common  talk  among  bankers,  and  we  are  surprised  that  public  atten- 
tion has  not  been  more  generally  called  to  it. 

DISCLOSING   THE    CONDITION    OF   A    DEPOSITOR'S   ACCOUNT, 

A  nice  point  is,  to  what  extent  it  is  justifiable  and  reasonable  for  the 
managers  or  officers  of  a  bank  to  reveal  to  third  parties  the  condition 
of  the  account  of  one  of  its  dealers.  There  is  no  direct  and  positive 
rule  that  can  be  laid  down  in  this  regard.  Law  and  common  sense 
must  be  left  to  rule  according  to  circumstances  in  this  dehcate  matter. 
The  semi-public  character  of  banking  institutions  is  a  feature  which 
has  an  important  bearing  upon  the  question  raised.  National  banks 
are  obhged  to  publish  reports  of  their  condition,  to  make  regular 
statements  of  their  resources  and  habifities  to  the  Comptroller  of  the 
Currency,  and  to  give  the  pubUc  Examiners  access  to  aU  their 
methods,  machinery  and  records  of  all  the  transactions  of  every 
name  and  nature  which  they  may  have.  It  should  be  borne  in  mind 
that  any  shareholder  in  a  bank,  no  matter  how  limited  his  holding,  has 
a  right,  as  one  of  the  proprietors,  to  "look  into"  his  bank  to  any 
extent  that  is  not  an  unreasonable  mterf  erence  with  its  regular  routine 
of  work  and  not  an  unjustifiable  interruption  of  its  administration.  It 
is  often  argued  that  any  person,  who  has  foxind  it  difficult  to  get  at  the 
situation  of  the  affairs  of  a  bank  by  a  direct  approach,  can  accomplish 
his  purpose  by  carefully  studying  its  pubUshed  reports  or  by  buying 
the  smallest  amount  of  stock  and  then  demanding  a  view  of  the  inside 
on  the  ground  of  being  a  stockholder. 

Bank  managers  and  officers  should  take  extreme  care  not  to 
disclose  in  an  indiscreet  manner  any  business  affairs. 

SHALL   WE   PROTEST? 

It  was  a  certificate  of  deposit,  regularly  issued  by  one  of  the  strongest 
National  banks.     Its  amount  was  $5,000.     In  time  it  came  back  for 
payment  through  the  Clearing-House  from  another  National  bank,  ' 
bearing  numerous  endorsements  besides  that  of  its  first  payee,  because 
it  had  passed  through  many  hands,  and  had  been  made  payable  from 


400  PRACTICAJj    BANKING. 

one  to  another.     When  tlie  Paying-Teller  of  the  issuing  bank  came  to 

pass  upon  this  eertifleate  before  he  should  finally  pay  and  cancel  it  he 

found  one  clearly  demanded  endorsement  missing.     One  payee  had 

omitted  to  put  his  name  to  the  voucher.     The  certificate  was  for  this 

reason  at  once  stopped  and  returned  to  the  bank  last  holding  it  and 

fi-om  whom  it  had  been  received  through  the  clearing  settlement.  This 

latter  bank  refused  to  guarantee' the  missing  endorsement,  and,  after  a 

second  regular  demand  upon  the  bank  issuing  the  certificate,  protested 

it  for  non-payment  and  returned  it  with  charges.     This  case  is  of  an 

instructive  character,  since  the  question  at  issue  under  it  .is  whether 

there  is  any  need  of  or  any  advantage  in  protesting  checks,  certificates 

of  deposit,  etc.,  of  whose  face  there  is  no  shadow  of  doubt  and  which 

are  sure  to  be  good  when  presented,  simply  because  of  fully  conceded 

irregularity  of  endorsements  or  an  absence  of  needed  endorsements. 

It  seems  clear  enough  that  there  is  not  the  sUghtest  need  of  protesting 

under  such  circumstances,  and  the  protesting  bank,  in  the  case  we 

have  described,  was  clearly  in  error  in   makmg  a  protest.     What 

possible  need  is  there  of  protesting  a  certificate  of  deposit  which  is  sure 

to  be  paid  whenever  presented  properly  endorsed  simply  because  the 

bank  which  has  issued  it  refuses  to  pay  it  because  it  comes  in  not 

properly  endorsed?    Protests  are  made  to  hold  endorsers;  but  what 

object  is  there  in  securing  endorsers  if  a  bank  is  entirely  satisfied  Avith 

the  promisors  ? 

"w:hen  interest  accrues. 

There  is  sometimes  a  little  confusion  in  the  minds  of  bankers  and 
business  men  regarding  the  question  of  the  interest  dues  in  transactions 
wliere  there  are  no  specific  statements  of  interest  contracts.  There 
are  certain  well-defined  principles  which  govern  such  cases  that  should 
be  understood.  Money  voluntarily  left  by  any  one  in  the  hands  of 
another  will  not,  of  course,  draw  any  interest  unless  a  specific  mutual 
agreement  to  that  effect  is  made.  But  when  funds  belonging  to  one 
person  are  wrongly  detained  by  another,  the  OAvmer  can  set  up  a  legal 
claim  for  interest  upon  the  sum  which  has  been  kept  from  him,  and 
the  rate  of  interest  coUectible  under  such  circumstances  will  be  deter- 
mined by  the  law  of  the  place  where  it  is  detained. 

There  is  a  point  of  no  Uttle  importance  to  be  noted  here.  It  is  often 
asked  whether  or  not  interest  can  be  enforced  whei-e  a  party  gives  a 
note  to  another  payable  on  demand  mthout  inserting  in  such  a  note 
the  words  "with  interest,"  although  the  transaction  was  entered  into 
with  the  understanding  upon  the  part  of  both  borrower  and  lender 
that  interest  should  be  paid  upon  the  sum  advanced.  The  claim  for 
interest  under  such  ch'cumstances  would  be  a  very  substantial  one, 
for  it  would  rest  upon  very  solid  grounds.  In  the  first  place  it  would 
always  be  probable  that  some  proof  of  the  existence  of  an  agreement 
or  understanding  that  interest  should  be  paid  upon  the  money  advanced 
could  be  presented,  but  without  such  specific  testimony  the  interest 


EVERYDAY  QUESTIONS  AND  OTHER  MATTERS.  401 

demanded  would  find  a  very  solid  support  iu  law  and  equity  in  the  fact 
that  the  very  nature  of  the  money  transaction  in  question  carries  with 
it  the  idea  of  compensation — of  hire  or  interest. 

The  money  is  the  property  of  the  lender,  who  has  placed  it  in  the 
hands  of  the  borrower  at  the  request  of  the  borrower  as  an  accom- 
modation. The  voucher  given  is  not  a  simple  certificate  of  deposit  but 
is  a  promissory  note  carrying  with  it  the  distinct  idea  of  accruing  interest. 

FORGED    ENDORSEMENTS. 

A  bank  is  supposed  to  know  the  signatures  of  its  depositors.  It  is 
one  of  its  first  and  most  important  duties  to  have  them  on  file  and 
inunediately  accessible  by  the  use  of  a  well-kept  signature  book. 
Holders  of  checks,  in  very  many  cases,  know  nothing  about  these 
drawer-signatures.  They  have  taken  them,  supposing,  of  course,  that 
they  are  genuine.  When  they  have  collected  the  checks  at  the  banks 
upon  which  they  are  drawn  they  are  to  a  very  great  extent  relieved  of 
all  further  responsibiUty  as  to  the  signatures  of  the  signers,  for  the 
bank  by  paying  them  has  guaranteed  their  genuineness.  But  the 
bank  which  cashes  for  a  good  holder  a  much-endorsed  check,  the 
signature  of  which  is  all  right,  generally  knows  nothing  about  its 
many  endorsements  beyond  the  fact  that  they  seem  to  be  all  right  and 
stand  there  in  regular  order,  apparently  correctly  made.  For  the 
honesty  and  genuineness  of  these  many  or  few  preceding  endorsements 
the  last  holder,  for  whom  the  check  is  cashed,  whether  he  endorse 
the  check  or  not,  is  fully  and  legally  held,  and  no  reasonable  lapse  of 
time  before  a  discovery  of  the  forgery  is  made  will  relieve  him  of  this 
liability. 

But  when  some  drawer  or  endorser  states  to  a  bank  that  it  has 
at  some  past  date  paid  a  check  bearing  a  forged  instead  of  a  genuine 
signature  of  that  person,  and  makes  a  demand  for  a  repayment  of  the 
money,  the  bank  which  has  the  misfortmie  to  stand  in  such  a  position 
must  proceed  carefully  in  this  matter  of  acknowledging  the  fraud  and 
repaying  the  amount.  It  has  a  right,  and  it  is  its  duty,  to  demand 
from  the  party  who  declares  that  his  name  has  been  forged  upon  the 
back  of  the  check  a  well-supported  affidavit  to  that  effect.  The  rela- 
tions and  responsibilities  of  the  paying  bank  to  the  drawee  and  to  the 
other  genuine  endorsers  of  the  check  render  tliis  course  absolutely 
necessary. 

INK  RESPONSIBILITY. 
A  courteous  and  intelligent  man  calls  at  my  desk,  and,  sitting  down 
by  me  asks  and  obtains  my  permission  to  show  me  in  five  minutes  that 
all  the  inks  I  am  using  in  my  bank,  and  all  which  I  have  ever  used  and 
ever  can  use,  except  the  one  he  proposes  to  show  me,  are  just  good  for 
nothing.  By  "good  for  notliing"  he  means  that  they  can  all  be 
quickly  removed  from  common  paper,  while  by  ink  which  is  good  for 
something,  he  means  the  ink  that  he  is  going  to  show  me,  which  he 
says  cannot  be  washed  out.     This  ink-man  carries  with  him  a  little 


402  PRACTICAL  BANKES'G. 

ease,  containing  two  small  bottles  holding  preparations  of  acids,  and 
accompanied  by  a  earners  hair  brush.  "Snook's  ink  eradieator"  he 
terms  this  affair,  and  says  that  I  or  any  one  else  can  buy  it  for  fifty 
cents  from  any  stationer.  He  adds  the  remark  that  his  friend  Jones, 
the  great  bank  stationer,  says  he  never  sells  this  ink  eradieator  wi^^hout 
feeling  that  he  does  a  careless,  if  not  a  wicked,  thing. 

From  the  letver,  check  or  dsaft  whieli  I  have  just  been  wi-iting,  the 
man  with  the  new  ink  quickly  washes,  with  his  eradieator,  with  perfect 
ease,  any  or  all  of  the  words  or  figures  which  I  have  made  upon  them. 
He  makes  what  we  term  a  ''good  job"  of  the  tiling;  for,  after  he  has 
ended  his  bleaching  process,  there  remains  upon  the  paper  no  trace  of 
the  former  wi'iting  and  no  sign  of  the  workings  of  the  acids.  The  ink- 
man  then  kindly  shows  to  me  his  own  new  and  "vvonderful  ink,  the 
great  fluid  called  the  "cosmopolitan  safety  ink,"  which  is  to  revolu- 
tionize the  writing  business,  since  it  will  make  tracks  upon  paper  which 
no  man  can  remove  with  any  chemical  prepai'ation  that  has  been 
discov^ered  or  that  ever  can  be  discovered.  In  proof  of  all  this  the 
agent  writes  m  my  presence  with  his  ink,  and  then  vainly  attempts  to 
eradicate  what  he  has  written  with  the  ink  eradieator  I  have  described 
as  being  a  part  of  his  equipment. 

The  agent  of  the  cosmopolitan  ink  next  produces  an  experimental 
sheet,  whereon  all  the  standard  common  writing  fluids  of  the  period 
have  been  submitted  to  acid  tests  by  Messrs.  Copperas  &  Co.,  the 
leading  chemists  and  assayers  of  New  York,  with  the  result  that  every 
one  of  them  may  be  said  to  have  stepped  down  and  out  under  the 
inquisition  to  wliich  they  have  been  subjected — not  one  of  them  offering 
any  sort  of  resistance  to  the  leading  and  well-known  re-agents  which 
come  into  the  class  of  ink-eradicators. 

This  significant  exhibition  is  then  supplemented  by  the  display  of 
another  test  sheet,  on  wliich  the  cosmopolitan  ink  has  been  subjected 
to  precisely  the  same  chemical  trials  as  those  which  were  imposed  upon 
the  ink-hst  just  described,  with  the  result  that  the  new  ink  stood  out 
clear  and  strong  after  all  the  attacks  made  upon  it. 

In  view  of  such  interesting  facts  as  these,  what  is  the  practical 
banker  of  to-day  to  do  in  these  ink  premises  ?  Shall  he  at  once  discard 
all  his  old  inks  and  adopt  the  new — or  Avhat  shall  he  do  about  the 
matter  ? 

At  this  precise  stage  in  the  history  of  ink  inventions  and  ink-eradicat- 
ing discoveries,  it  is  not  easy  to  answer  the  questions  I  have  raised 
in  this  connection. 

When  it  has  been  as  firmly  established  that  any  new  ink  will  stand,  as 
it  is  now  certain  that  the  old  will  not  stand,  it  will  become  the  duty  of 
al  1 1  )ankers  to  discard  the  old  and  adopt  the  new.  It  will  become  unsafe 
f(jr  them  to  do  otherwise.  By  doing  anything  else  the  banker  will  take 
upon  himself  a  dangerous  responsibility — a  responsibility  similar  in 
nature  and  philosophy  to  that  which  he  assumes  when  he  uses  an  unsafe 


EVERYDAY    QUESTIONS    AND    OTHER    MATTERS.  403 

paper  in  drawing  checks,  or  unsafe  doors  and  locks  when  he  puts  away 
the  cash  and  securities  of  his  banli. 

The  most  interesting  question  to  be  raised  by  any  alert  banker  when 
a  new  safety  paper,  a  new  combination  lock,  a  safety  ink  or  a  cheek 
punch  is  presented  to  liim  is  this:  You  say  no  attempt  to  circumvent 
either  has  so  far  been  successful,  but  how  long  is  it  to  be  before  cunning 
rascals  will,  by  their  successes,  prove  'them  worthless  as  safeguards  ? 
How  long  will  it  be  before  the  agents  of  something  new  in  each  of  the 
lines  named  will  come  along,  saying,  ' '  These  are  all  '  no  good ; '  here  is 
something  you  can  really  rely  upon." 

The  responsibility  assumed  by  banks  and  business  men  when  they 
do  ilot  use  the  best  of  methods  and  machinery  in  the  transaction  of 
their  check  business  is  laid  down  clearly  in  the  following  legal  decisions 
in  "Daniel  on  Negotiable  Instruments": 

"  But  when  the  drawer  has  drawn  his  check  iu  such  a  careless  and  incomplete 
manner  that  a  material  alteration  may  be  readily  accomplished  without  leaving  a 
perceptible  mark  or  giving  the  instrument  a  suspicious  appearance,  he  himself  prepares 
the  way  for  fraud,  and,  if  it  is  committed,  he,  and  not  the  bank,  should  suffer.  This 
doctrine  is  clear,  and  sustained  by  authority." 

The  Supreme  Court,  the  United  States  Circuit  Court  and  the  Court 
of  Common  Pleas  have  rendered  the  following  decision : 

"The  maker  of  check  is  obliged  to  use  all  due  diligence  in  protecting  it ;  the 
omission  to  use  the  most  effectual  protection  against  alteration  is  evidence  of  neglect, 
which  renders  him  responsible  for  the  fraudulent  amount,  the  bank  being  responsible 
only  i-or  the  genuineness  of  the  signature  and  ordinary  care  in  paying  the  check." 

The  United  States  Circuit  Court,  October  15,  1874,  gave  the  opinion  : 

"  If  there  was  nothing  unusual  in  the  appearance  of  the  raised  check,  nothing 
Bufflcient  to  put  a  careful  person  on  his  guard,  the  bank  shall  not  be  responsible  for 
paying  it." 

The  Court  of  Common  Pleas,  "Herald,"  February  3,  1875: 

"  Where  one  person,  by  his  act  or  omission,  induces  another  to  part  with  his 
property  beyond  the  power  of  reclamation,  he  is  estopped  from  showng,  as  between 
such  person  and  himself,  that  such  action  on  his  part  was  the  result  of  ignorance  or 
of  fraud  practiced  upon  him.  Of  the  two  innocent  parties,  he  is  the  cue  that  must 
bear  the  loss," 

POWERS    OF    ATTORNEY. 

The  banker  who  is  asked  to  accept  for  himself  or  to  guarantee  for 
some  one  else  the  correctness  of  an  endorsement  by  attorney,  expects 
that  the  paper  of  authorization  under  which  the  attorney  acts  will  be 
left  with  his  bank  or  placed  on  file  at  some  other  bank  or  an  equally 
accessible  and  public  place.  Powers  of  this  sort — in  fact  all  kinds  of 
what  may  be  termed  per  procuration  papers — are  in  many  cases  very 
judiciously  made  a  matter  of  public  record  at  the  offices  of  Registers  of 
Deeds.  In  such  cases  the  fact  of  the  record  is  carefully  minuted  on 
the  original  power  by  the  oflBcers  at  the  office  of  the  Register  of  Deeds, 
and  the  record  at  this  office  is  of  great  reference  value  in  case  evidence 
of  the  correctness  and  existence  of  the  powers  in  question  are  asked 
for.  In  drawing  up  papers  of  the  class  discussed  ready  aid  may  be 
found  in  the  books  of  law  forms  which  are  sure  to  be  in  the  Ubrary  of 


404  PRACTICAL    BAIJfKING. 

every  bank.  Below  will  be  found  an  original  form  of  a  power  of 
attorney  from  a  husband  to  his  wife  to  draw  checks,  collect  di\idends, 
etc.  which  is  a  model  of  conciseness  and  directness.  It  will  have  a 
curiou.'-  interest  for  the  reader  from  the  fact  that  it  is  the  power  of 
attorney  of  Daniel  Webster  to  his  wife — in  Mr.  Webster's  own  hand- 
writing—a power  taken  from  the  files  of  the  bank  where  it  was  actually 
used  by  Mrs.  Webster: 


LEGAL    AND    ILLEGAL  HOLIDAYS. 

There  are  two  classes  of  holidays  for  bankers  and  merchants  who 
are  willing  to  take  tiiem — those  which  are  termed  legal  holidays  and 
those  which  are  not.  In  the  case  of  the  first  named  the  banks  find  no 
difficult  questions  arising  as  to  the  way  they  shall  be  kept. 

Banks  on  such  days  are  not  open  at  all,  do  not  receive  their  mails 
or  transact  business  of  any  description,  but  as  far  as  business  is  con- 


EVERYDAY    QUESTIONS    AND    OTHEK    MATTERS.  405 

cerned.  consider  them  just  the  »auic  as  a  Sunday,  and  this  arrangement 
is,  of  course,  perfectly  safe  and  consistent. 

Illegal  holidays,  on  the  contrary,  are  in  many  points  a  source  of 
annoyance  both  to  the  banks  and  their  customers.  We  have  in  this 
country  none  too  many  bank  holidays,  and  in  the  matter  of  closing 
days  it  would  be  a  far  better  arrangement  than  the  one  now  existing 
if  "we  had  more  lawful  bank  holidays  and  fewer  days  of  closing  which 
have  not  been  legalized;  for  where  a  bank  observes  holidays  which  are 
not  legal — shuts  up  its  place  of  business  when  it  has  no  legal  authority 
to  do  so — it  has  to  assume  responsibilities  which  are  sometimes  trouble- 
some and  even  risky. 

The  matter  of  maturing  paper  is  one  of  the  most  important  points 
I  should  mention  in  referring  to  this  matter. 

Where  notes  maturing  on  the  illegal  holiday  are  in  the  hands  of  the 
closing  bank  for  collection  it  cannot  oblige  the  promisors  to  take  them 
up  the  day  preceding.  Most  makers  of  paper  are,  however,  in  the 
habit  of  cheerfully  doing  this.  They  shut  up,  themselves,  on  the  holiday 
and  are,  of  course,  glad  to  attend  to  all  business  which  matures  thereon 
on  the  day  in  advance.  But  those  exceptional  customers  who  do  not 
favor  the  closing,  and  do  not  close  themselves  or  wish  any  one  else  to 
do  so,  know  their  rights  and  are  often  quite  vvrilling  to  maintain  them. 
Their  holiday-maturing  paper,  where  the  hohday  is  an  illegal  one,  must 
be  kept  in  hand  by  its  holders  until  the  close  of  business  on  the  hoUday 
in  question,  for  it  cannot  be  protested  until  then.  If  the  paper  is 
payable  at  a  particular  bank,  that  bank  must  in  effect  be  open  at  its 
regular  hours  on  the  illegal  holiday  in  order  to  attend  to  this  paper,  so 
that  banks  which  shut  under  such  liabilities  for  collection  and  present- 
ment usually  leave  some  clerk  at  the  bank  to  take  charge  of  the  unpaid 
maturities  of  that  day — collect  or  protest  them — or  post  a  notice  on  the 
doors  stating  where  their  unpaid  paper  maturing  on  that  day  may  be 
found  and  where  presentments  coming  to  them  may  be  demanded. 

If  the  maturing  paper  has  not  been  made  payable  at  a  bank  or  any 
other  specially  named  point  other  than  the  signer's  residence  or  place 
of  business,  the  bother  is  increased,  for  if  unpaid,  it  must  be  presented 
to  and  its  payment  demanded  from  the  maker  personally  (if  he  can  be 
found)  at  his  place  of  business,  or  his  residence  if  he  cannot  be  found 
at  his  place  of  business. 

Makers  of  notes  of  this  last-named  type  cannot  be  forced  to  hunt 
up  their  paper — to  go  to  a  bank,  for  instance,  to  pay;  they  can  demand 
that  the  paper  shall  be  brought  to  them  before  a  legal  demand  can  be 
made  upon  its  endorsers. 

The  bank,  which  shuts  on  an  illegal  lioliday'with  paper  of  this  class 
maturing  that  day,  must  be  very  careful  to  see  that  the  paper  in  ques- 
tion is  attended  to  in  the  manner  we  have  stated. 

Sometimes  awkward  embarrassments  arise  in  closing  on  illegal 
hoHdays  in  the  matter  of  the  deposits.     A  dealer  has  been  known  to 


406  PRACTICAL   BANKLNQ. 

make  trouble  for  liis  bank  because  it  shut  up  his  balance — made  it 
inaccessible — on  an  illegal  holiday  when  he  needed  to  check  upon  it 
to  meet  notes  or  pay  bills. 

The  treatment  of  the  incoming  mails  on  an  illegal  hoHday  is  also  a 
serious  question  and  closing  banks  are  sometimes  at  a  loss  what  to  do 
in  this  matter. 

Especially  is  this  the  case  in  cities  and  towns  where  there  are  many 
banks  and  a  Clearing-House.  As  no  settlements  at  clearing  are  made 
on  such  days,  and  as  the  banks  have  no  means  of  making  collections 
from  each  other,  it  evidently  becomes  a  dangerous  and  embarrassing 
thing  for  any  bank  to  take  its  letters  from  the  post  office  on  such  a  day ; 
if  it  takes  them  from  the  mail  it  sliould  open  them,  and  if  it  opens  them, 
the  question  arises  how  shall  it  proceed  if  the  letters  contain  large 
checks  and  sight  and  demand  drafts  ?  Regarding  its  treatment  of  the 
latter  the  diflSculty  is  increased  by  the  fact  that  the  places  of  business 
of  the  drawees  are  likely  to  be  shut. 

If  it  does  not  take  its  mail  from  the  office  at  all  it  certainly  may 
incur  very  unpleasant  responsibilities,  yet  the  chance  of  trouble  seems 
less  from  this  course ;  and  I  have  no  doubt  that  it  is  the  better  plan  not 
to  take  the  mail  from  the  custody  of  the  postoffiee.  My  readers  will 
not  doubt  that  I  have  very  decided  views  against  going  for  the  mails 
on  Sundays  and  other  legal  closing  days. 

SHALL   NATIONAL   BANKS    BBCOME    DEALERS    IN    MONEY? 

Shall  National  banks  become  dealers  in  money,  or  shall  they  simply 
bank  iipon  the  capital  furnished  them  by  their  shareholders,  unhu'ed 
depositors,  and  bill  holders  ?  There  is  no  banking  question  of  the 
period  of  more  vital  interest  than  this,  and  none  which  is  being  more 
actively  discussed. 

There  is  no  doubt  but  that  some  of  the  most  successful  banks  in  the 
United  States — banks  which  have  paid  the  largest  kind  of  dividends, 
and  which  to-day  show  a  heavy  surplus  and  a  current  business  of  the 
most  profitable  character — are  those  which  have  been  run  upon  a 
moderate  share  capital  and  large  interest-paid  deposits.  These  banks 
have  bought  money  in  all  directions,  paying  comparatively  heavy- 
prices  for  it,  and  have  sold  the  same  at  a  very  slight  advance.  Yet  the 
magnitude  of  their  transactions  has  so  swollen  their  profits  that  their 
small  capitals  have  reaped  the  largest  remuneration.  This  is  doing 
business  on  the  London  joint-stock  bank  principle— a  principle  which 
has  in  London  been  worked  with  marvellous  success.  The  leading 
London  banks  in  question  carry  deposits,  upon  which  heavy  interest  is 
paid,  to  the  amount  of  from  ten  to  twenty  times  their  capital.  Their 
dividends  have  for  many  years  been  enormous,  and  their  shares  to-day 
sell,  in  some  instances,  at  two  or  three  times  their  par  value. 

Banks  which  deal  in  money  to  the  extent  which  I  have  described, 
and  which  carry  the  limited  share  capital,  have  need  only  of  making  a 
very  small  percentage  on  the  money  they  handle  in  order  to  earn  a 


EVERYDAY    QUESTIONS    AXD    OTHER    MATTERS.  407 

large  dividend  for  their  share  capital.  The  motto  of  such  institutions 
is  large  sales  and  small  profits,  yet  the  net  results  are  most  satisfactory. 

The  risks  of  banking  of  this  cla.ss  are  large.  The  management  of 
the  enormous  loans,  which  is  the  critical  feature  of  the  business, 
demands  extraordinary  vigilance  and  caution,  for  a  slight  sweep  in  the 
wrong  direction,  where  such  heavy  current  investments  are  being 
made  in  notes,  acceptances  and  collateral  loans,  must  at  once  wreck 
all  prospects  of  dividends  for  stockholders. 

It  must  have  been  noticed  by  observing  bankers  that  the  drift  of 
banking  in  the  United  States  has  of  late  been  in  the  direction  of  an 
imitation  of  this  English  style  of  doing  business.  The  great  success 
which  has  marked  the  management  of  some  of  our  largest  trust  com- 
panies— which  have  copied  directly  the  London  banking  methods — 
has  had  much  to  do  with  leading  the  National  banks  into  the  habit  of 
paying  higher  rates  of  interest  upon  deposits. 

WHAT    CONSTITUTES   A   LEGAL   SIGNATURE. 

I  held  in  my  hand,  on  one  occasion,  a  draft  drawn  upon  the  United 
States  for  $25,  It  was  a  draft  for  a  poor  soldier's  quarterly  pension. 
Being  written  payable  to  his  order  it  needed  his  endorsement.  The 
soldier  had  endorsed  it  with  a  lead  pencil.  The  United  States  refused 
to  pay,  saying  it  must  be  endorsed  in  ink.  I  had  to  send  the  uncollected 
draft  ti'aveling  back  five  hundred  miles  in  search  of  the  soldier  and  an 
ink  endorsement.  The  demand  of  the  Treasury  was  in  accordance 
with  its  regulations,  but  not  in  accordance  with  English  and  American 
law,  and  may  be  termed  a  red-tape  rule.  A  signature  written  in  pencil 
is  just  as  binding  as  one  written  in  ink.  In  fact,  it  makes  little 
difference  with  what  materials  a  person  records  his  or  her  name ;  and, 
even  more,  an  individual  can  be  said  to  be  the  endorser  of  a  paper  if  he 
does  not  put  a  mark  upon  it  at  all,  but  merely  makes  a  declaration  to 
that  effect.  For  illustration  of  this  point  let  me  lead  my  reader  to  the 
busy  desk  of  a  Paying-Teller  of  a  bank,  where  I  have  witnessed  such 
a  transaction  as  this : 

Resolute  customer  presents  a  check  on  the  bank  payable  to  his  own 
order.  Teller  says,  ' '  You  must  endorse  it. "  Customer  refuses,  saying, 
"You  have  the  check  in  your  hand,  and  I  have  ordered  you  to  pay  it; 
what  iiiore  do  you  wish  ?"  If  the  check  was  cashed  under  such  cir- 
cumstances, the  law  would  hold  that  the  payee  had  really  ''endorsed" 
it,  although  he  had  left  on  the  check  no  written  testimony  to  that  effect. 

For  writing  is,  after  all,  only  a  very  convenient  proof  of  an  act  of  a 
person.  And  because  it  is  such  a  convenient  evidence  of  a  deed— of  an 
agreement  -custom  demands  it  in  .such  cases  as  the  one  I  have  given. 

To  show  still  more  clearly  the  minor  importance  of  the  mere  writing, 
I  recall  a  case  where  a  man  who  had  signed  a  note  wherein  he  promised 
not  to  pay  it,  the  ' '  not "  being  obviously  put  in  for  a  fraudulent  purpose, 
was  held  obliged  to  pay  it,  because  he  really  owed  it. 

I  have  known  an  instance  where  a  man  who  had  signed  an  agreement 


408  PRACTICAL   BANKING. 

in  pencil,  permitted  liis  dauf^hter  to  trace  over  tlie  signature  \vith  ink. 
The  signature  Avas  lield  to  be  valid. 

Auotlier  important  signature  fact  is  that  an  attorney,  if  he  has 
autliority  of  the  right  character,  may  sign  the  name  of  liis  principal 
without  expressing  tliat  he  has  so  done  under  a  power  of  attorney  or 
by  procuration. 

This  practice  is  not  one  to  be  recommended,  since  it  leads  to  con- 
fusion in  the  matter  of  discriminating  regarding  signatures. 

A  bank  was  at  one  time  in  the  habit  of  receiving  for  collection  the 
cotton  drafts  of  a  certain  Southern  dealer.  Drawees  found  that  these 
individual  drafts  varied  in  the  character  of  the  signature  of  the  drawer 
and  hesitated  to  honor  them.  The  bank  finally  discovered  that  this 
drawer,  who  was  an  illiterate  man,  employed  other  men  to  sign  his 
name  on  notes  and  drafts,  under  powers  not  requiring  that  their  agency 
should  be  expressed  in  the  signature. 

A  MARK  AS  GOOD    AS   A  NAME. 

SaysBlaekstone:  ''  The  method  of  the  Saxons  was  for  such  as  could 
write  to  inscribe  their  names,  and  whether  they  could  write  or  not,  to 
affix  the  sign  of  the  cross ;  which  custom  our  illiterate  vulgar  do,  for 
the  most  part,  this  day  keep  up,  by  signing  a  cross  for  their  mark  when 
unable  to  write  their  names." 

Checks  are  endorsed,  notes  are  signed,  dividends  are  receipted  for, 
and  all  kinds  of  vouchers  given  and  documents  executed  by  what  may 
be  termed  the  signature  of  a  mark. 

Although  many  banks  and  bankers  take  the  ground  that  special 
guarantees  are  required  for  endorsements  by  attorney  and  procuration, 
no  one  well  informed  in  this  regard  will  claim  that  there  is  any  need 
for  a  special  guarantee  of  an  endorsement  by  mark. 

In  common  and  statute  law  and  by  legal  decisions  and  business 
customs,  a  formally  executed  signature  by  mark  is  recognized  as  just  as 
binding  and  as  regular  as  a  clearly  written  and  acknowledged  signa- 
ture. The  law  fully  prescribes  the  form  in  which  the  signature  by 
mark  shall  be  executed,  and  tradition  and  custom  have  united  in 
agreeing  upon  its  general  style.  Where  a  signature  by  mark  is  to  be 
made  and  accepted,  some  person  who  can  write  records  the  name  of 
the  party  who  is  seeking  to  give  his  sign-manual.  Then  a  mark  is 
made  in  the  middle  of  the  name  by  the  would-be  signer.  If  he  is 
incapacitated  from  even  making  a  simple  mark  he  may  touch  or  hold 
the  top  of  the  pen  as  the  mark  is  being  made  for  him. 

As  regards  the  mark  itself,  there  are  no  rigid  rules  governing  its 
style  or  shape.  It  may  be  in  the  form  of  the  rude  cross  of  the  Saxon 
signer  or  it  may  be  little  more  than  the  thumb  mark  of  the  middle 
ages.  Anything  that  signifies  a  signature  will  pass  if  witnessed,  for  the 
law  demands  that  a  mark  shall  always  be  witnessed.  To  make  this 
matter  perfectly  clear  a  form  is  here  given  showing  an  endorsement  by 
1  !ark,  as  made  on  the  back  of  a  check  that  had  been  drawn  payable 


EVERYDAY    QUESTIONS    AND    OTHER    MATT^IRS.  409 

to  the  order  of  a  party  who,  for  some  reason  or  other,  had  to  make  his 
witness  mark : 


I 

The  proportion  of  persons  doing  business  with  our  banks  who  can- 
not make  a  written  signature  is  small,  yet  there  are  few  bankers  who 
have  not  had,  at  one  time  or  another,  to  help  along  through  this  mark- 
making  some  collector  of  a  dividend  or  indorser  of  a  check. 

The  plan  of  getting  up  a  signature  by  mark  came  from  England, 
and  it  is  quite  an  institution  there.  On  one  occasion  about  half  the 
agricultural  laborers  in  an  average  rural  district  signed  a  political 
petition  by  their  marks. 

Notwithstanding  the  good  bank  authorization  given  this  style  of 
"writing"  it  is  by  no  means  a  form  of  penmanship  to  be  recom- 
mended. No  person  who  is  not  physically  disqualified  from  using  a 
pen,  shoiild  make  a  "mark"  in  this  country  of  fi-ee  evening  schools 

for  adults. 

IMPORTANT    AND    VALUABLE    SIGNATURES. 

In  another  place  has  been  described  the  use  of  the  Paying-Teller's 
common  signature  book — the  index  reference  volume  in  which  is 
recorded  the  signatures  of  all  regular  depositors,  including,  m  cases  of 
check-drawing  firms  with  partners,  the  autograph  of  each  individual 
member  of  the  concern. 

There  is  another  class  of  signatures  that  might  well  be  included  in 
this  book.  I  refer  to  the  signatures  of  the  Cashiers  and  Presidents  of 
all  the  banks  in  the  town  in  which  the  institution  is  located  and  the 
signatures  of  the  bankers  with  whom  it  is  constantly  dealing. 

From  time  to  time.  Assistant  Cashiers  are  appointed  in  these  near- 
by banks  wliose  signatures  are  liable  to  crop  out  spasmodically  on  cer- 
tifications and  Cashier's  checks.  When  these  Assistant  Cashiers  are 
appointed,  the  banks  commissioning  them  send  to  their  correspondents 
a  circular  announcing  the  appointment  and  containing  the  new  signa- 
ture. These  circulars  should  be  carefully  preserved  in  the  Paying- 
Teller's  signature  book,  so  that  he  may  not  be  forced  to  rely  solely  on 
his  memory  when  the  signatures  in  question  turn  up,  and  that  the 
deputies  in  his  department,  who  do  his  work  in  his  absence,  may  not 
have  to  send  around  to  banks  to  enquire  whether  such  and  such  a  man, 
signing  as  Assistant  Cashier,  is  a  duly  authorized  signer  for  the  bank. 

There  is  still  a  third  set  of  signatures  in  which  the  bank  takes  an 


410  PKACTICAL    BAXKIXG. 

interest  and  of  wliich,  what  we  may  call  standard,  sjiecimens,  should  be 
readily  accessible.  In  buying  notes  and  acceptances  of  dealers  and 
brokers  in  paper  banks  have,  in  many  instances,  no  positive  means  of 
knowing  whether  or  not  the  names  on  the  paper  are  genuine.  In  this 
matter  they  are  often  obliged  to  rely  solely  upon  the  generally  satis- 
factory appearance  of  the  notes  or  bills,  and  the  good  repute  of  the 
parties  offering  the  paper  for  sale.  But,  in  many  cases,  or,  at  least,  in 
some  eases,  as  I  have  known  from  actual  experience  in  the  premises, 
bank  managers  would  be  glad  to  have  some  handy  opportunity  of 
corroboratmg  their  impressions  in  this  matter  of  the  signatures  of  the 
paper  they  are  buying,  and  the  men  they  are  dealing  w'ith. 

The  difficulty  of  judging  in  this  matter  of  signatures  is,  of  course, 
complicated  by  the  facts  that  the  signatures  of  many  houses  are  often 
made  by  different  members  of  the  concern,  and  that  the  taking  in  of 
new  partners  and  withdrawal  of  old  ones,  leads  also  to  changes  in 
their  sign  manual  ;  so  that  a  memory  of  what  had  *been  the  usual 
signature  of  a  firm  might  not  be  of  the  least  service  when  con- 
fronted by  a  signature  made  by  some  recently  admitted  member  of 
the  house.  While  it  might  not  be  practicable  to  have  every  bank 
equip  itself  with  full  sets  of  so  extensive  a  line  of  signatures  as  tliis 
would  necessarily  be,  yet  I  believe  it  would  be  quite  possible  and 
a  very  good  idea  to  have  the  signatures  of  leading  houses,  whose  names 
are  liable  to  be  often  afloat  upon  promises  to  pay,  a  matter  of  central 
record.  Could  there  not  be,  for  example,  in  a  city  like  New  York, 
some  central  point  like  its  Clearing  House  or  Chamber  of  Commerce, 
where  a  book  of  signatures  might  be  kept  in  careful  custody,  in  which 
book  there  should  be  an  indexed  list  of  the  signatures  which  we  have 
described  as  belonging  to  the  class  most  liable  to  be  often  in  request 
for  examination  and  comparison? 

By  a  little  care  and  persistence  on  the  part  of  the  banks  it  would 
soon  become  a  custom  for  business  houses  on  starting  to  send  their 
authorized  signatures  to  this  point  of  inquiry,  and  to  continue  to  send 
there  changes  in  their  styles  of  signing,  as  they  from  time  to  time  took 
place. 

And  here  might  also  well  be  kept  proofs  of  authority  to  sign  by 
attorneyship,  and  procuration,  existing  among  these  leading  business 
houses. 

Bank  managers  are  continually  being  annoyed  and  delayed  by  the 
claims  of  individuals  to  sign  in  these  last-named  capacities,  when  these 
managers  have  not  at  their  immediate  command  the  means  of  verify- 
ing the  correctness  of  the  proffered  signatures. 

HOW  DO  THEY  STAND? 

There  is  no  question  more  fauiiliar  to  the  ears  of  the  banker  than 

this  simple,   expressive   and   nK)st   direct   inquiry.      There   are  times 

when,  and  circumstances  under  which,  it  is  his  duty  to  endeavor  to 

respond,  to  the  best  of  his  ability,  to  questions  of  this  character;  there 


EVEKYDAY    QUESTIONS    AND    OTHER    MATTERS.  411 

are  also  occasions  when  it  is  not  necessary  for  liiui  to  make  any  great 
exertions  to  reply  to  iheiii. 

The  manager  of  a  bank,  who  receives  from  valued  correspondents 
and  depositors  requests  to  "enquire  up "  a  house,  considers  it  a  part  of 
his  legitimate  business  as  a  banker  to  answer  such  I'equests  as  fully 
and  as  promptly  as  possible.  But  it  is  neither  his  duty  nor  within 
his  province,  to  endeavor  to  enlighten  every  wandering  paper  buyer 
who  strays  within  liis  bank  in  search  of  a  little  information  regarding 
the  standing  of  some  paper  which  he  is  hesitating  whether  to  purchase 
or  not,  and  about  which  he  has  already  enquired  in  many  quarters. 
He  is  especially  unwise  to  attempt  to  volunteer  information  m  the 
premises  when  the  enquirer,  to  whom  he  is  under  no  business  obliga- 
tions, has  legitimate  opj)ortunities  of  his  own  for  knowing  just  as  much 
about  the  notes  or  acceptances  in  question  as  any  one  else. 

Discussion  of  credits  in  banking  circles  is  sometimes  very  delicate 
business.  Particularly  is  this  the  case  when  the  concerns  under  con- 
sidei-ation  are  makers  of  a  large  amount  of  paper,  and  doing  such  a 
broad  business  that  any  estimate  of  their  standing  must  be  based  more 
upon  instinct — individual  impression  and  knowledge  of  them  of  the 
most  general  cliaraeter — than  upon  a  special  and  accurate  acquain- 
tance with  the  real  condition  of  the  houses.  Cases  coming  within  this 
category  are  vastly  more  common  in  these  days  of  expanded  credits 
and  immense  concentrations  of  business  than  they  were  in  years  past. 

Regarding  some  of  the  houses  which  give  the  most  paper  and  are 
the  most  enquired  about  by  everybody,  it  may  be  said  that  the  verdict 
upon  their  standmg  by  the  most  experienced  of  bankers  in  the  vicinity 
amounts  to  little  more  than  an  individual  opinion,  based  upon  the 
most  uncertain  knowledge.  It  is  neither  wise  nor  safe  for  a  banker 
to  pass  along  such  opinions  unless  into  the  eai's  of  those  with  whom 
he  has  the  most  confidential  business  relations. 

This  matter  in  many  cases  must  be  left  to  rest  in  about  this  way : 
To  the  enquiry  of  casual  investigators  of  credits,  who  have  no  claims 
for  any  special  assistance  in  the  work  of  discriminating  in  their  pur- 
chase of  paper,  the  banker  must  often  only  reply  that  he  thinks  the 
paper  stands  well,  but  that  he  really  does  not  know  more  about  it, 
and  has  no  means  of  knowing  more  about  it,  than  the  enquirer. 
And  he  can  make  such  a  reply  in  good  faith,  even  though  he  may 
be  himself  hesitating  to  take  the  very  paper  in  question  because  he 
feels  he  does  not  know  enough  about  it,  and  under  those  circumstances 
is  getting  an  impression  that  he  does  not  want  more.  For  that  is  the 
very  point  I  wish  particularly  noticed,  that  such  impresnions  or  instincts, 
while  they  may  be  made  a  basis  of  action  on  tlie  part  of  their  pos- 
sessor, are  not  to  be  carelessly  passed  over  to  others. 

DISCOUNTS    FOR    SHAREHOLDERS. 
One  provision  of  the  National  Bank  Act  is  as  follows:  "No  bank 
shall  loan  or  discount  on  the  security  of  shares  in  its  own  capital  stock 


412  PRACTICAL    BAXKIXG. 

unless  such  security  or  purchase  shallbeneces^sury  to  prevent  loss  upon 
a  debt  previously  contracted  in  good  faith."  When  shares  are  taken 
under  the  contingency  last  nanied  the  Bank  Act  demands  that  they 
be  sold  witliin  six  months.  This  provision  has  some  points  to  recom- 
mend it,  but  it  is  open  to  serious  objections.  Every  practical  banker 
knows  that  cases  are  often  coming  up  where  deserving  shareholders 
who  ai'e  little  accustomed  to  negotiating  loans,  and  seldom  in  want  of 
bank  accommodation,  very  naturally  come  to '' their  bank  "  (that  is, 
to  the  bank  in  which  they  are  old  shareholders)  with  their  stock  certi- 
ficates, asking  for  some  temporary  advance  of  money  on  their  shares. 
In  instances  of  this  kind  first-class  security  is  offered  by  parties  who 
seem  to  have  a  reasonable  claim  for  loans.  They  may  have  no  other 
collaterals  to  offer,  and,  unless  the  bank  can  introduce  them  to  some 
other  bank  where  these  shares  can  be  legally  pledged,  such  applicants 
must  go  away  disappointed.  As  these  negotiations  are  almost  always 
of  a  moderate  size  it  is  possible  that  a  practical  way  out  of  the  difficulty 
might  be  found  in  an  amendment  to  the  Bank  Act  permitting  banks  to 
loan  limited  sums  to  any  one  person  upon  a  pledge  of  their  own  shares. 
The  ideas  of  the  original  f  ramers  of  the  Bank  Act  were  correct  enough 
in  theory.  They  wished  to  prevent  promoters  of  banking  schemes 
from  having  an  opportunity  of  carrying  along  their  unpaid  shares  in 
the  loans  of  the  banks  which  issued  them. 

CAN  NATIONAL  BANKS  ACCEPT  TIME  DRAFTS? 
Some  of  these  banks  have  been  in  the  habit  of  so  doing,  and  are 
doing  it  at  this  very  time,  but  fhe  practice  is  one  not  to  be  recom- 
mended and  not  consonant  with  the  principles  of  sound  banking.  Our 
question,  however,  is  not  whether  it  is  the  best  banking,  but  whether 
it  is  or  is  not  illegal  and  contrary  to  the  provisions  of  the  United  States 
Bank  Act.  Opmions  of  the  Banking  Department  at  Washington,  as 
given  by  the  Comptrollers  of  the  Currency  who  have  from  time  to 
time  expressed  their  views  on  the  question  before  us,  are  not  neces- 
sarily law.  The  decisions  of  the  Comptrollers  in  this  and  other  bank 
matters  are  in  the  nature  of  suggestions  and  recommendations,  and, 
as  far  as  they  are  positively  in  line  w'ith  the  letter  of  the  United  States 
laws  under  which  banks  exist,  can  be  strictly  enforced,  and  no  further. 
Banks  are  supposed  to  read  and  study  the  laws  for  themselves,  and 
to  be  directly  responsible  to  the  Government  for  their  admmistration 
under  those  laws.  They  are  not  governed  by  the  simple  opinions  of 
the  meaning  of  those  laws,  as  from  time  to  time  promulgated  by  vari- 
ous Comptrollers  of  the  Currency,  but  they  make  their  exegesis  of 
them  for  themselves  and  govern  themselves  accordingly.  Thus  much 
we  have  premised,  because  it  is  well  understood  that  nearly  every 
Comptroller  of  the  Currency  has  taken  the  foUowing  view  of  the 
question  :  "It  has  always  been  held  by  this  office  that  National  banks 
have  not  the  right  given  them  by  law  to  take  on  any  obligation  for  the 
payment  of  money  in  which  tlie  element  of  time  exists;  in  other  words, 


EVERYDAY   QUESTIONS    A>'D    OTHER    MATTERS.  418 

that  National  banks  are  accountable  on  demand,  without  notice,  for 
all  clebts  which  they  can  legally  assume,  and  that  they  cannot  legally 
create  any  liabihty  not  payable  on  demand."  Thus  much  for  the 
Comptrollers'  decisions.  But  notwithstanding  these  decisions  National 
banks  are,  as  we  have  said,  accepting  by  their  Presidents  or  Cashiers, 
time  drafts,  and  have  not  been  enjoined  for  so  doing  simply  from  the 
fact  that  Comptrollers  cannot  see  anything  in  the  Bank  Act  making 
the  practice  illegal.  And  there  is  nothing  in  the  Bank  Act  absolutely 
prohibiting  the  acceptance  of  depositors'  time  checks  upon  National 
banks,  yet  such  a  method  is  certainly  not  in  harmony  with  the  spirit 
of  the  National  Bank  Act  or  consonant  with  the  generally  received 
ideas  of  what  constitutes  good  banking,  and  it  is  to  be  hoped  that 
the  Act  will  some  day  be  amended  so  as  to  make  the  practice  positively 
unlawful. 

There  have  been  periods  when  National  bank  acceptances  of  the 
class  in  question  have  been  hawked  about  the  streets  of  some  of  our 
cities,  much  to  the  discredit  of  the  banks  which  stood  upon  them  as  ac- 
ceptors and  the  merchants  and  bankers  who  were  the  drawers  of  the 
paper.  The  circulation  of  tliis  questionable  sort  of  paper  has  always 
led  to  inquiries  of  the  Banking  Department  at  Washington  as  to  its 
regularity  and  legality.  Although  the  Comptrollers  of  the  Currency 
have  condemned  the  issue  of  vouchers  of  tliis  description  they  have  not 
been  able  to  find  any  positive  laAvs  for  their  suppression.  But  they 
have  generally  suppressed  themselves,  for  both  the  accepting  banks 
and  the  time-drawing  depositors  who  have  figured  upon  this  class  of 
paper  have  in  most  instances  made  an  early  entrance  into  bankruptcy, 
and  the  issue  of  the  objectionable  "  kites  "  discussed  has  usually  been 
deemed  an  indication  of  the  approaching  collapse  of  all  concerned  in 

them. 

RIGHT    TO    USE    THE    TERM    "BANK." 

Cases  are  not  rare  in  the  various  States  where  single  individuals 
or  firms  doing  business  as  private,  unincorporated  concerns,  assume 
the  name  "bank."  Thus,  for  instance,  Robert  Smith,  located  in  Red 
Brook,  Dakota,  and  running  a  country  variety  store  on  a  capital  of 
§3,000,  may  conclude  to  attach  a  banking  and  collection  business  to 
his  merchandise  trade.  He  assumes  the  name  of  Bank  of  Red  Brook, 
and  sends  out  soliciting  letters  and  circulars  so  headed,  and  gets  his 
"bank"  registered  as  such  in  various  lists  which  are  in  use  by  the 
business  community.  This  method  is  not  in  accordance  with  the 
spirit  of  common  law,  although  there  may  not  be  in  all  the  States 
statute  laws  prohibiting  such  action.  There  is  an  air  of  false  pretense 
about  it  wliich  should  render  it  open  to  condemnation. 

In  New  York,  New  England  and  some  other  States  the  title 
"bank"  can  be  lawfully  used  only  by  duly  incorporated  banks  which 
are  organized  and  conducted  under  the  provisions  and  restrictions  of 
the  State  banking  laws.  A  State  bank,  therefore,  is  one  which  makes 
sworn  reports  of  its  condition  as  required  and  otherwise  conforms  to 


414  PRACTICAIi    BANKING. 

the  State  law  governing  it.  In  certain  States  there  are  banks  author- 
ized under  special  cliarter-s,  general  copartnership  laws  etc. ,  but  -which 
make  no  report  of  their  condition  worthy  of  the  name — these  cannot 
rightfully  be  called  State  banks. 

ACCOMMODATION    SIGNATURES. 

Presidents'  and  Cashiers'  signatures  are  often  in  great  request  on 
petitions  and  recommendations,  but  these  ofl&cials  should  be  exceed- 
ingly careful  in  this  matter  of  name-lending,  since,  after  all,  their 
official  names  are  really  not  their  own  property,  but  rather  the  prop- 
erty of  the  institutions  which  employ  them,  and  which  have  selected 
them  as  their  managers  and  given  them  their  banking  titles,  so  they 
ought  to  be  very  discreet  when  called  upon  for  their  indorsement. 

Wlien  a  man  signs  a  petition  or  recommendation  as  President  or 
Cashier  of  this  or  that  bank  he  really  voices  the  opinion  of  his  bank — 
something  which  he  has  no  actual  right  to  do  unless  he  has  direct  and 
intelligent  authority  from  his  bank  to  thus  sign  for  it,  or  is  positively 
sure  it  would  wish  him  to  sign  were  the  signature  circumstances  known 
to  it,  and  would  fully  approve  the  act. 

There  is,  without  doubt,  altogether  too  much  freedom  exercised  by 
bank  managers  in  the  matter  of  which  we  are  speaking,  and  it  is  im- 
portant that  the  point  should  receive  notice.  Care  sliould  also  be 
used  in  lending  the  individual  name  of  heads  of  banks  to  these  docu- 
ments referred  to,  since  H\e  outside  public  are  quite  apt  to  so  closely 
connect  the  individual  signatures  with  their  official  ones,  and  to  incline 
to  view  the  one  just  about  the  same  as  the  other — to  think  they  have 
the  recommendation  and  influence  of  a  bank  behind  them  when  they 
have  only  its  manager's  private  sign-manual. 

It  is  so  easy  for  a  banker  to  fling  on  his  name ;  it  is  so  much  in  his 
line ;  it  is  often  such  a  polite  and  accommodating  act ;  it  costs  little, 
and  is  sometimes  so  hard  to  refuse.  It  is  for  all  these  reasons  in  many 
cases  so  much  easier  to  do  it  than  not  to  do  it,  that  it  becomes  necessary 
to  emphasize  tlie  duty  of  not  doing  it  except  when  it  is  in  every  way 
prudent  and  justifiable. 

The  person  who  is  most  careful  in  this  juatter — who  guards  scrupu- 
lously the  use  of  his  name,  and  never  gives  it  except  after  due  deliber- 
ation and  investigation,  and  where  right  and  duty  authorizes  it — wUI 
find  in  the  end  that  his  name  is  the  one  most  valued  and  sought  after. 

PROPER  USE  OF  BANKING  TERMS. 

An  explanation  of  a  few  banking  terms — or  rather  an  explanation 
of  the  way  certain  banking  terms  in  frequent  use  should  be  applied — 
may  not  be  out  of  place : 

1.  The  word  hank.  This  is  a  noun  of  multitude,  and  can  have  pro- 
nouns as  well  as  verbs  agreeing  with  it  either  in  the  plural  or  singular 
number.  Yet  regard  should  be  had  in  its  use  to  the  import  of  the 
term  as  conveying  unity  or  plurality  of  ideas.  Gilbart  lays  down  the 
following  rules  to  be  observed  in  the  use  of  the  term  :  ' '  When  any 


EVKKYDAY    QUESTIONS    AXD    OTHER    MATTERS.  415 

operation  or  feeling  of  the  mind  is  ascribed  to  a  bank  the  verbs  and 
pronouns  are  placed  in  the  plural,  as  follows:  The  Bank  of  England 
petitioned  against  this  bill,  and  were  heard  by  counsel;  but  their 
representations  produced  no  effect."  When  reference  is  made  to  a 
bank  simply  as  an  institution  the  term  is  considered  to  belong  to  the 
singular,  as  follows:  "The  Bank  of  Scotland  continued  the  only  bank 
from  the  date  of  its  establishment  in  1695  to  1727. "  When  the  rules 
or  habitual  acts  of  a  bank  are  noticed  the  word  belongs  to  the  singular, 
as,  "The  ProWncial  Bank  allows  interest  at  the  rate  of  2  percent." 
When  the  word  bank  is  connected  with  a  past  participle  by  means  of 
the  neuter  verb  to  be  it  usually  belongs  to  the  singular,  as,  "Suppose a 
bank  loas  enabled  to  take  6  per  cent,  on  a  cash  credit  instead  of  4."' 
When  the  word  bank  is  preceded  by  the  indefinite  article  a  or  un,  by 
the  demonstrative  pronoun  this  or  that,  or  by  the  words  each,  any, 
every  one,  it  belongs  to  the  singular,  as,  "  Suppose  one  bank  in  Scotland 
made  its  notes  payable  in  Scotland  at  the  place  where  the  notes  were 
issued."  When  the  word  bank  is  introduced  in  either  the  singular  or 
the  plural  number  the  same  number  should  be  preserved  throughout 
the  sentence.  Hence,  the  following  sentence  of  Smollett's  is  inaccurate : 
' '  By  the  same  acts  the  bank  was  required  to  advance  a  sum  of  not 
exceeding  £2,500,000  towards  discharging  the  National  debt,  if  wanted, 
on  condition  that  they  should  have  £5  per  cent,  for  as  much  as  they 
might  advance  redeemed  by  Paiiiament. "  When  the  word  bank  is  used 
m  the  singular  number  it  is  considered  as  a  substantive  of  the  neuter 
gender,  and  hence  is  associated  with  the  relative  pronoun  which;  but 
when  used  in  the  plural  number  it  implies  the  idea  of  persons  and  has 
accordingly  the  personal  relative  who,  as,  ' '  The  bank  with  which  he 
kept  his  account  has  stopped  payment;"  or,  "The  bank  whose 
interests  are  affected  by  the  proposed  measure  have  petitioned  against 
it."  McCuUoch,  in  his  "  Commercial  Dictionary,"  considers  a  bank  to 
be  a  lady,  for,  under  an  article  on  banking,  he  says :  ' '  The  Bank  of 
Ireland  draws  on  London  at  20  days.  She  neither  grants  cash  credit 
nor  allows  any  interest  upon  deposits ;  she  discounts  at  the  rate  of  £5  per 
cent."  And  it  is  quite  common  with  Enghsh  writers  to  characterize 
the  Bank  of  England  as  a  lady  —an  old  lady ! 

Mr.  Gilbart,  the  writer  on  banking  already  quoted,  takes  the 
ground  that,  when  speaking  of  the  accepter  of  a  bill,  the  word  should 
be  spelled  in  the  same  way  as  when  speaking  of  the  accepter  of  a 
present  or  fee.  The  Scotch  bankers  always  write  this  word  accepter. 
Says  Gilbart:  "We  do  not  say  the  drawor  or  the  payor;  why  should 
we  say  the  acceptor  f  " 

2.  In  regard  to  another  word  the  question  is  raised :  Should  it  be 
written  indorse  or  endorse.  Indorse  is  derived  direct  from  the  Latin 
in  dorsum,  which  means  "on  the  back. "  Endorse  comes  from  the 
Latin  through  the  French  endosser.     Most  legal  writers  adopt  indorse. 

3.  Should  clieck  or  cheque  be  written  ?    Tliis  word  is  derived  from 


416  PKACTICAI,    BAXKIXG. 

the  French  eches,  chess.  In  England  chequers  placed  at  the  doors  of 
public-houses  are  intended  to  represent  chess  boards,  and  originally 
denoted  tliat  the  game  of  chess  was  played  in  those  places.  Similar 
tables  were  employed  in  reckoning  money,  and  hence  came  the 
expression,  ''to  check  on  account;"  and  the  Government  office,  where 
the  accounts  were  kept,  was  called  the  Exchequer.  The  word  clieque 
is  in  universal  use  in  England.  The  word  check  is  used  in  the  United. 
States,  and  this  mode  of  spelling  is  not  likely  to  be  changed  in  this 
country. 

4.  Shall  we  write  enclose  or  inclose  when  we  make  up  letters,  in 
sending  away  notes,  drafts,  etc.  ?  Either  word  is  correct,  and  the 
writer  can  consult  his  own  tastes  in  using  them. 

A  POINT  ABOUT  USURY  UNDER  THE  NATIONAL  BANK  ACT. 

Time  and  again  the  National  banks  have  been  sued  under  existing 
State  usury  laws.  These  various  State  laws  regarding  usurious 
practices  are  of  every  hue  and  character.  In  some  States  these 
statutes  are  of  a  very  severe  type — so  strict  as  to  make  their  violation 
prove  a  very  costly  thing  in  case  of  conviction.  But  in  every  instance 
where  National  banks  have  been  con\icted  of  usury  under  State 
statutes  an  appeal  to  the  United  States  Supreme  Court  has  resulted  in 
the  reversal  of  the  verdicts  of  the  State  courts.  The  present  precise 
status  of  this  usury  conflict  is  this : 

Neither,  by  set  off  nor  original  action  can  interest  over  legal  rates 
paid  to  a  National  bank  be  recovered,  except  by  way  of  penalty  as 
prescribed  by  the  Act  of  Congress  of  June  3,  1864,  In  a  word,  no 
matter  what  laws  against  usurious  rates  may  exist  in  any  given  State, 
the  National  banks  in  that  State,  and  in  all  States,  can  only  be  suc- 
cessfully proceeded  against  for  usurious  practices  under  what  is  known 
as  the  Interest  Penalty  Act  of  the  United  States  Revised  Statutes. 
This  Act  provides,  that  usury  shall  be  punished  by  a  forfeiture  of  twice 
the  amount  of  interest  paid  if  action  is  commenced  within  two  years 
of  the  time  of  such  usurious  practice,  and  that  recovery  can  be  had 
for  the  entire  amount  of  interest  paid  at  any  time. 

CAN  NATIONAL.  BANKS  BUY  PAPER? 

There  is  no  question  but  that  they  do,  or  think  they  do,  almost 
every  day;  yet,  though  this  question  has  often  been  raised  in  contests 
between  banks  and  parties  to  whom  advances  upon  notes  have  been 
made,  it  is  an  interesting  and  important  fact,  that  it  has  never  been 
passed  upon  or  decided  by  the  United  States  Supreme  Court.  This 
Court  has  ruled  that  paper  enters  a  bank  loan  either  by  way  of 
a  discount  or  purchase.  But,  though  all  purchases  of  time  paper  may 
be  termed  discounts  all  discounts  are  not  purchases.  Where  a  bank 
discounts  paper  for  a  broker  who  does  not  endorse  it,  it  may  be  held 
that  the  transaction  is  a  purchase.  If  a  bank  makes  loans  to  a 
customer  upon  his  endorsed  paper,  which   in   addition  to  any  other 


EVERYDAY   QUESTIONS    AND    OTHER    MATTERS.  417 

names  bears  his  own  endorsement,  it  may  be  assumed  that  tlie  trans- 
action is  in  the  nature  of  a  discount  and  not  of  a  purchase.  But  the 
note  which  enters  the  loan  of  a  bank  eitlier  by  way  of  a  discount  or 
purchase  is,  in  either  ease,  subject  to  usury  laws,  Wliether  or  not  a 
National  bank  can  buy  notes  turns,  of  course,  upon  the  construction  of 
the  meaning  of  the  Avord  "  nepfotiate"  in  that  section  of  the  Bank  Act 
which  relates  to  its  powers  in  the  matter  of  making  investments.  It  is 
there  declared  that  a  bank  can  buy  bonds,  bullion,  etc.,  and  "  negoti- 
ate "  paper. 

BANK    RESERVES. 

There  is  no  question  more  frequently  asked,  and  none  more  difficult 
of  a  short  and  easily-understood  reply,  than  the  one  so  often  levelled 
at  bank  maneigers,  of  "just  what  reserves  are  you  obliged  to  carry 
under  the  National  Bank  Act,  as  it  to-day  exists,  after  the  many 
amendments  it  has  undergone  ? " 

I  propose  to  explain  this  reserve  matter  so  clearly  that  the  reader, 
who  remembers  what  T  here  record,  will  not  again  be  obliged  to  ask 
the  question  alluded  to.  The  reply  will  come  from  the  standpoint  of  a 
Boston  National  bank,  and  the  reserve  requirements  of  National  banks 
in  the  other  reserve  cities  are  the  same.  Outside  the  reserve  cities  a 
smaller  reserve  is  required  and  the  proportions  of  cash  reserve  and 
funds  with  reserve  agents  are  different. 

A  National  bank  in  Boston  is  squarely  required  to  keep  a  reserve 
of  25  per  cent,  upon  its  deposits.  Before  the  amendment  of  the  National 
Bank  Act,  the  same  bank  would  have  been  obliged  to  hold  also  a 
reserve  of  25  per  cent,  on  all  its  outstanding  circulation.  The  amend- 
ment releasing  the  banks  from  this  circulation  reserve  is  quite 
generally  held  by  thoughtful  and  unprejudiced  financiers  to  have  been 
a  rather  injudicious  one.  Under  the  law  as  it  originally  stood,  the 
banks  were  not  in  the  habit  of  carrying  any  too  much  reserve.  Under 
the  law  as  it  now  stands,  they  are  in  danger  of  running  along  with 
altogether  too  little  lawful  money. 

But  the  methods  of  making  up  this  item  of  deposits  upon  which 
the  reserve  is  to  be  maintained  is  what  few  outside  of  a  bank  seem 
capable  of  understanding,  with  the  explanations  so  far  received,  if 
we  may  judge  by  the  very  wild  conclusions  reached  when  outside 
attempts  at  figuring  out  the  reserve  conditions  are  made  by  writers 
and  talkers,  who  take  the  published  returns  of  our  banks  as  a  basis 
for  investigation. 

This  deposit  item  is  made  up  of  the  individual  deposits  of  the 
bank,  after  deducting  from  them  the  total  amount  of  uncollected 
cheeks  upon  other  banks  which  are  to  be  charged  in  through  the  next 
morning's  clearing,  and  which,  in  the  published  returns  of  the  banks, 
are  denominated  exchanges  for  Clearing-House.  There  was  a  time 
when  this  deduction  was  not  allo"wed;  but,  after  a  long  contest  with 
the  Banking  Department  at  Washington,  this  concession  was  made. 


418  PRACTICAL,    BAXKIXG. 

and  fully  established  by  a  formal  decision  of  the  then  Comptroller  of 
the  Currency.  To  these  individual  deposits  must  be  added  the  item 
of  dividends  unpaid,  for  we  have  before  us  a  Comptroller's  decision 
that  these  unpaid  dividends  must  be  viewed  in  the  light  of  sums 
passed  to  the  credit  of,  and  belonging  to,  depositors — in  fact,  deposits 
to  be  called  for  at  any  time. 

The  last  feature  of  the  deposit  item  is,  perhaps,  the  most  difficult 
of  explanation,  and  it  is  made  up  of  bank  balances.  A  reserve  must 
be  kept  upon  the  amounts  held  by  any  National  bank  to  the  credit  of 
any  other  banks  if  this  amount  is  not  fully  offset  by  balances  due  from 
other  National  banks,  after  deducting  from  that  debit  sum  the 
amounts  counted  as  reserve  in  banks  which  are  approved  reserved 
agencies  in  New  York. 

And  now  I  finish  this  topic  by  explaining  how  a  Boston  National 
bank  may  make  up  this  25  per  cent  reserve : 

1st.  It  may  deduct,  to  begin  with,  from  the  required  25  per  cent., 
the  5  per  cent,  reserve  fund  kept  in  Washington  for  redemption  of 
circulation. 

2d.  It  may  keep  in  New  Tork,  in  some  National  bank  or  banks 
approved  by  the  Comptroller  for  its  reserve  agent,  one-half  of  this  25 
per  cent,  reserve  remaining  after  making  the  deduction  just  named. 

The  balance  beyond  the  authorized  or  a  smaller  actual  amount  held 
with  the  reserve  agent  may  be  made  up  as  follows :  It  must  consist 
of  legal-tenders  in  the  vaults  of  the  bank,  or  balances  due  from 
the  United  States  payable  on  demand;  or  gold  coin,  standard  silver 
coin,  or  silver  certificates,  all  of  which  may  be  counted  as  a  portion  of 
the  lawful  money  reserve. 

There  are  no  restrictions  as  to  the  denominations  of  the  legal-tenders 
required  as  a  reserve,  though,  by  a  rule  of  the  Boston  Clearing-House, 
no  legal-tenders  under  the  denomination  of  $20  are  receivable  in 
settlement  of  Clearing-House  balances. 

QUERY  ABOUT  MONEY  RESERVE. 
Can  a  New  York  city  National  bank  keep  one-half  of  its  lawful 
money  reserve  with  some  other  National  bank  in  the  same  city  ?  The 
National  Bank  Act  permits  this.  This  is  clearly  laid  down  in  Section 
5195  of  that  Act.  The  New  York  banks  have  not  been  in  the  habit  of 
availing  themselves  of  the  privilege  thus  given.  They  carry  the  whole 
of  the  25  per  cent,  of  deposits  in  lawful  money  in  their  own  vaults. 
There  is  nothing  to  prevent  them,  if  they  so  choose,  from  putting 
one-half  of  this  25  per  cent,  in  the  hands  of  some  other  National  bank 
in  New  York,  Avhere  it  might  be  earning  some  interest.  I  am  perfectly 
well  aware  that  it  is  claimed  that  the  Comptroller  of  the  Currency  has 
construed  this  reserve  law,  as  far  as  it  refers  to  the  point  I  have 
in  question,  differently  from  the  construction  I  have  just  given. 
But  law  is  law,  and  I  hardly  see  how  the  Comptroller  can  claim  the 
right  to  say  that  a  section  of  the  Bank  Act,  which  is  in  no  way  obscure 


EVERYDAY    QUESTIONS    AND    OTHER    MATTERS,  419 

is  not  to  be  read  and  understood  according  to  its  letter.  The  banks 
have  the  law  before  theui  for  their  guide.  Comptrollers'  decisions  are 
not  United  States  law  except  so  far  as  they  are  entii'ely  in  harmony 
with  the  United  States  statutes. 

It  may  be  said  that  the  reserve  agent  of  a  National  bank  must,  in 
order  to  be  acceptable,  have  the  approval  of  the  Comptroller.  This  is 
law  surely ;  yet  it  was  thus  enacted  to  help  to  secure  for  the  National 
banks  sound  places  for  the  deposit  of  a  portion  of  their  reserve.  It 
can  hardly  be  imagined  that  a  Comptroller  would  disapprove  of 
a  selected  reserve  agent  on  any  other  ground  than  a  want  of 
confidence  in  the  bank  thus  selected.  For  illustration :  If,  accord- 
ing to  the  provision  of  the  National  Bank  Act,  the  Importers  & 
Traders'  National  Bank,  of  New  York,  should  decide  to  put  one-half 
of  its  reserve  in  the  National  Bank  of  Commerce,  New  York,  would 
any  Comptroller  refuse  to  approve  such  a  reserve  agent?  If  he  refused 
to  give  his  approval  on  the  ground  that  the  bank  selected  was  unsafe 
as  a  reserve  agent  such  a  refusal  would,  of  course,  seem  absurd.  If  he 
refused  because  he  held  that  the  selection  in  question  was  illegal,  an 
appeal  to  the  letter  of  the  law  itself  ought  to  settle  the  matter  very 
quickly  in  favor  of  the  action  of  the  New  York  bank.  In  case  of  a 
dispute  a  recourse  would  very  naturally  be  had  to  the  Supreme  Court, 
and  not  to  Comptrollers'  decisions. 

Some  person,  writing  upon  the  point  we  have  in  hand,  has  said  that 
it  appears  to  him  that  the  carrying  out  of  this  idea  of  a  New  York 
National  bank  keeping  one-half  of  its  reserve  in  another  New  York 
National  bank  would  simply  result  in  a  general  exchange  of  reserves, 
■without  profit ;  or,  as  he  exactly  puts  it,  "more  book-keeping  and  no 
profit."  To  make  clear  the  incorrectness  of  this  last  statement  let  me 
give  a  simple  practical  illustration.  Supposing  there  were  but  two 
National  banks  in  New  York  city,  and  these  were  the  First  National 
and  the  Second  National  Banks,  each  with  deposits  of  $12,000,000. 
Under  the  laAv  they  would  each  be  required  to  hold  a  reserve  of 
$3,000,000.  Let  the  First  National  Bank,  as  the  law  allows,  deposit 
one-half  of  its  $3,000,000  in  the  Second  National  Bank,  and  the  Second 
National  Bank  one-half  of  its  §3,000,000  in  the  First  National  Bank, 
each  receiving  2  per  cent,  interest  upon  the  $1,500,000  named,  and  each 
having,  also,  §1,500,000  more  to  loan,  less  reserve  held  upon  it,  at  3  or 
or  4  per  cent. ,  or  Avhatever  higher  rates  it  might  obtain.  Is  it  not  clear 
to  see  that  each  bank  would  make  more  money  than  it  would  if  it  kept 
its  whole  $3,000,000  reserve  idle  in  its  vaults? 

In  discussing  this  reserve  question  we  have  nothing  to  say  about  the 
wisdom  of  a  law  which  permits  such  a  shifting  about  of  reserves  as 
described.  We  do  not  see  anything  more  absurd  in  a  New  York  bank 
keeping  one-half  its  reserve  in  another  New  York  bank,  than  there  is  in 
a  bank  in  Boston  being  allowed  by  law  to  keep  one-half  of  its  reserve 
in  a  bank  in  New  York.     The  question  very  naturally  arises,  "Why 


420  PRACTICAL    BANKING. 

does  this  last-named  provision  of  the  Bank  Act  exist  ?  Wliat  is  the 
Boston  reserve  kept  in  New  York  for  ? ''  Tlie  Boston  bank  is  satisfied 
with  tlie  arrangement,  because  it  gets  interest  upon  money  that  would 
otherwise  be  idle.  In  the  true  sense  of  the  word,  this  New  York 
balance  is  much  less  a  "reserve "  for  the  Boston  bank  than  it  would  be 
if  it  was  loaned  on  call  in  Boston  upon  pledge  of  United  States  bonds 
or  equally  solid  security. 

In  Boston,  when  New  York  funds  are  heavy,  selling  at  a  large 
discount,  as  they  often  do,  in  close  times,  it  seems  a  far  cry  to  Wall 
Street. 

In  some  instances,  is  it  not  a  fact  that  this  very  money  which  the 
Bank  Act  calls  a  reserve  of  the  Boston  banks  is  loaned  out  on  Wall 
Street  upon  pledge  of  securities  not  quite  as  solid  as  Governments  ? 

BANKING  WITHOUT  LEGAL-TENDER  RESERVES. 

Since  the  abolition  of  the  law  requiring  a  reserve  upon  the  circula- 
tion of  National  banks,  these  institutions  have  been  able  to  slide  along, 
with  very  small  stocks  of  legal-tenders.  I  give  an  illustration  of 
what  might  readily  occur : 

Banks  in  certain  large  cities  specified  in  the  Act  must  keep  a  reserve 
of  25  per  cent,  of  their  deposits,  but  for  banks  outside  of  these  cities 
the  requirement  for  reserve  is  only  15  per  cent,  of  the  deposits — two- 
fifths  of  this  to  be  in  the  shape  of  legal-tenders  in  their  own  vaults, 
and  three-fifths  in  that  of  bank  balances  in  redeeming  cities.  And 
from  this  15  per  cent,  they  may  deduct  the  5  per  cent,  redemption  fund 
on  deposit  at  Washington. 

Suppose  the  circulation  of  such  a  bank  to  be  $200,000,  its  5  per 
cent,  redemption  fund  in  Washington  would  amount  to  $10,000.  Then, 
provided  it  has  a  rather  small  line  of  deposits,  say  $60,000,  it  may 
count  its  required  reserve  at  15  per  cent,  of  that,  or  $9,000.  But, 
from  this,  according  to  the  Comptroller's  decision,  may  be  deducted, 
if  we  may  use  the  expression  under  the  cireiunstanees,  the  $10,000  on 
deposit  in  Washington.  It  will  thus  be  seen  that  a  bank  of  the  period 
under  the  present  laws  may  comply  with  the  legal  reserve  require- 
ments by  holding  less  than  nothing  in  the  till. 

WOMEN  OF  BUSINESS. 
Men  of  business,  often  those  of  comparatively  limited  experience, 
are  sometiuies  heard  speaking  unfavorably  of  woman's  capacity  for 
doing  business,  particularly  that  of  a  general  financial  character  or  in 
the  line  of  banking.  A  somewhat  extended  period  of  practice  and 
observation  in  business,  especially  in  the  business  of  banking  and 
finance,  will  lead  any  sensible  person  to  take  an  exception  to  these 
remarks.  The  great  majority  of  women  have  been  given  few  oppor- 
tunitii's  to  show  what  they  could  do  in  managing  financial  matters. 
The  average  woman  of  the  period  has  only  a  spending  acquaintance 
with   money.     She   is  furnisliod   with  more  or  less   of  it,  but  is  not 


EVERYDAY    QUESTIONS    AXD    OTHER    MATTERS.  421 

expected  to  undei'stand  how  it  is  gained  or  managed.  In  tliose 
exceptional  cases  where  women  have  been  called  upon  to  a.ssume 
wider  financial  responsibilities  they  have  shown  sliill  and  ability  in 
their  management.  Tiiere  are  many  women  wlio  are  to-day  serving 
faitlifully  as  Treasurers  of  Savings  banks,  bank  Directors,  etc.,  and 
there  arc  numerous  instances  where  women  are  doing  the  entire  work, 
as  far  as  business  details  are  concerned,  in  small  banks  in  the  interior. 
The  time  is  undoubtedly  approaching  wlicn  there  will  be  a  more 
common  employment  of  women  in  our  National,  State  and  Savings  banks. 

There  are  various  classes  of  work  to  be  done  in  banks  for  which 
women  have  special  natural  qualifications.  Among  these  are  the 
business  of  handling  paper  money,  assorting  checks,  folding  and 
mailing  letters  and  cutting  and  trimming  new  bank-notes. 

The  growing  practice  of  using  type-writers  and  stenographers  in 
banking  is  giving  to  women  a  very  useful  sphere  in  banks.  The 
wonderful  facility  with  which  an  expert  type-writer  lady  will 
manipulate  this  piano-like  aid  to  correspondence  proves  to  many  a 
banker  her  special  fltne.'^s  for  playing  upon  this  invaluable  help. 
What  may  be  termed  an  extremely  attractive  combination  in  the 
work  of  "  talking  upon  paper"  in  a  bank  or  general  business  oflice  is 
that  of  a  union  of  the  services  of  a  stenographer  and  type-writer.  The 
hard  pressed  bank  manager  or  merchant  can  drive  with  ease  through 
considerable  writing  by  dictating  to  a  stenographer  who  writes  the 
short-hand  into  type  on  the  type-writer,  and  women  will  do  for  both, 
because  they  can  work  as  well  at  stenography  as  type-writing. 

In  discussing  the  comparative  value  of  male  and  female  help  in 
banks  and  other  positions  of  responsibility  the  suggestion  has  been 
made  that  women  are  less  honest  than  men — more  likely  to  commit 
breaches  of  trust  than  the  opposite  sex.  This  idea  was  recently  ad- 
vanced by  a  lady  who  had  considerable  intimacy  with  the  girls,  having 
been  for  many  years  at  the  head  of  a  seminary  for  young  ladies. 
She  gave  it  as  her  decided  opinion  that  girls  were  more  given  to  petty 
thieving  than  boys.  Possibly  her  opinion  may  have  had  less  value 
from  the  fact  that  she  never  had  much  to  do  with  boys.  There  is  not 
a  doubt  that  this  verdict  of  a  woman  on  women  is  an  unjust  one. 

In  the  great  money  establishment  at  Washington  is  a  small  army 
of  girls  who  have  assorted  bills  for  years.  Under  former  Treasvu-ers 
men  had  been  employed  to  do  this  work.  The  Treasurer  of  the 
United  States  says,  that  losses  have  been  far  less  under  the  present 
system  of  employing  female  help  in  a-ssorting  than  when  men  did  the 
work.  He  thought  the  young  women  had  proved  themselves  more 
honest  than  the  young  men.  Comparisons  in  this  matter  are  not 
particularly  attractive,  but  the  remark  of  the  lady  above  quoted  has 
provoked  them. 

As  to  the  comparative  value  of  women  as  financial  administrators 
many  persons  claim  that  their  status  has  been  emphatically  settled  by 


422  PRACTICAIi   BANKING. 

the  maladministration  and  financial  diversion  of  bankers  like  Mrs. 
Howe.  Argument  like  this  overlooks  the  fact  that  there  have  been 
male  Mrs.  Howes  in  abundance  from  the  days  of  the  South  Sea  bubble 
down  to  the  more  modern  Pacific  Bank  and  Grant  &  AVard  failures. 

PRINCIPAL    VERSUS   INTEREST. 

He  was  a  man  of  large  experience,  having  been  in  active  business 
for  more  than  sixty  years.  By  industry,  sagacity,  and  a  commendable 
economy,  he  had  accumulated  one  of  the  largest  properties  in  the 
place  whei'e  he  lived.  While  he  lingered  with  me,  to  draw  a  dividend 
on  the  large  block  of  shares  which  he  held,  he  gave  me  a  bit  of  advice 
— a  specimen  of  the  financial  philosophy  upon  which  he  said  he  had 
acted  throughout  his  business  career.     It  was  this: 

First,  look  out  for  your  principal.  Make  as  sure  as  you  possibly 
can,  in  this  world  of  uncertainties,  of  its  absolute  safety,  and  then 
give  attention  to  the  matter  of  securing,  as  an  income  from  this 
principal,  all  the  interest  you  can  honorably  and  honestly. 

He  remarked,  further,  that  his  observation  had  been  that  most  men 
thought  more  of  interest  than  of  principal — bestowed  their  main 
endeavors  on  getting  high  rates,  and  tlius  neglected  a  proper  care  and 
oversight  over  the  main  sum  in  hand. 

The  bulk  of  the  disastrous  financial  failures  were,  in  his  opinion,  the 
outcome  of  this  unwise  mode  of  engineering  money  matters. 

This  man  was  a  pillar  of  strength  in  the  wide  financial  circle  in 
which  he  had  so  long  lived  and  moved,  and  his  sagacious  words  would 
here  have  additional  weight  were  I  to  mention  his  name. 

There  are  few  bankers  of  wide  experience  who  will  not,  at  least 
partially,  endorse  his  testimony.  And  there  are  few  who  will  not  flatly 
testify  that  the  chronic  reluctance  of  men  Avho  have  acquired  money  to 
let  it  lie  idle — unproductive  of  interest,  for  even  a  short  time — has 
been  one  of  the  most  fruitful  sources  of  losses  and  final  disaster. 

Periods  of  low  rates  for  money  are  sure  to  foster  wild  speculations. 
But  the  really  sagacious  man  will  not  be  apt  to  forget,  that  when 
money  is  cheap,  investments  are  apt  to  be  dear.  He  ^vill  often  choose 
to  let  his  balances  lie  idle,  for  long  periods,  rather  than  purchase 
shares,  bonds,  etc.,  which  have  been  inflated  by  the  plethora  of  money, 
realizing,  what  so  many  are  apt  to  forget,  that  even  slight  declines  in 
the  quotations  of  his  purchases  Mill  lay  over — wipe  out — all  the  gain 
wliich  was  hoped  for  by  keeping  the  money  busy  and  the  income 
continuous. 

There  are  times  when  the  most  profitable  investment  is  that  of  an 
idle,  safe  balance  at  the  bank,  which,  though  not  accumulating  any 
interest,  is  at  the  immediate  command  of  its  owner. 

"A    LONG   FIRM." 
This  name  cannot  be  very  familiar  to  my  readers,  though  many  of 
them   will  undoubtedly  exclaim,  before  I  get   through  witli  what  I 


EVERYDAY    QUESTIONS    AND    OTHER    MATTERS.  423 

propose  to  say  under  this  heading,  that  tliey  and  misery  linow  well 
what  a  long  firm  really  is.  The  title  is  of  English  origin.  Those 
having  to  deal  with  a  so-called  long  firm  are  pretty  sure  to  find  out  to 
their  cost,  befoi*e  tliey  are  done  with  it,  that  it  is  a  very  short  as  well 
as  a  very  long  firm. 

The  origin  of  the  name  and  class  is  as  follows : 

Some  years  ago  there  began  to  spring  up  in  London,  Liverpool,  and 
other  English  cities  a  set  of  self-styled  commission  houses,  whose 
pai'tners  were  adepts  in  swindling,  and  who  were  as  destitute  of  means 
as  they  were  of  principle.  These  concerns  were  generally  manned  by 
a  large  number  of  partners,  who  spread  themselves  abroad  quite 
widely.  Hence  they  were  early  dubbed  by  those  who  were  victimized 
by  them  by  the  name  of  long  firms,  which  title  will  be  better  under- 
stood and  appreciated  when  I  have  more  fully  described  their 
character  and  methods  of  operation.  As  the  scoundrels  have  been 
quite  successful  in  engrafting  themselves  on  our  leading  cities,  I 
might  as  well  give  tlie  description  a  fresh,  home  flavor. 

A  house  proposing  to  be  one  of  the  class  in  question  will  generally 
be  found  to  be  made  up  of  men  who  have  suddenly  turned  up  in  a 
given  city,  claiming  to  have  been  doing  business  "somewhere  else," 
and  that  somewhere  else  so  conveniently  distant  as  to  render  enquiries 
about  them  slow  and  difiicult.  They  compliment  their  latest  location 
by  saying  they  are  tliere  because  they  believe  the  place 'has  excellent 
business  facilities,  and  parade  lots  of  references,  which  generally  turn 
out  to  be  of  the  most  illusive  and  intangible  character. 

The  concern  begins  business  by  hiring  a  store  in  a  good  location.  If 
they  take  but  one  floor,  or  even  a  single  room  on  a  floor,  they  emblazoa 
upon  their  letter-heads,  circulars  and  bills  a  flattering  picture  of  the 
whole  building,  well  ornamented  with  their  names,  thus  conveying  to 
unwary  consignors  the  impression  that  they  are  a  very  big  concern, 
occupying  a  very  big  store.  This  humbugging  stationery  they  manage 
to  scatter  widely  among  producers  and  shippers  at  a  very  early  date, 
hoping  thereby  to  influence  consignments.  To  add  to  their  pretensions 
they  manage  to  induce  some  liighly  respectable  bank  to  permit  them 
to  open  an  account,  and,  by  various  kiting  processes,  and  frequent 
overdrafts,  succeed  in  doing  quite  a  "  banking  business,"  very  likely 
talking  quite  familiarly  of  "our  bank,"  when  they  are  out  of  hearing 
of  it,  and  sometimes  even  going  so  far  as  to  print  its  name,  entirely 
without  permission,  among  their  references. 

By  the  use  of  such  luethods  and  machinery  as  we  have  described 
the  "  long  firm,"  which  has  really  neither  character,  capital,  credit  nor 
facilities  for  selling  goods  at  a  fair  price,  and  which  is  ahuost  sure  to 
swindle  any  consignor  who  trusts  them,  often  secures  many  consign- 
ments from  interior  farmers,  manufacturers  and  dealers. 

AVhen  it  has  gone  the  full  length  of  its  rope  in  one  city,  it  takes  a 
long  jump,  and  comes  up  smiling,  under  a  new  firm  name,  in  another 


424  PRACTICAL,    BAEfKING. 

city.     This   exj)osure  of  the  dark  ways  of  the  long  firms  is  the  best 
warning  against  them  I  can  place  on  record. 

A  word  or  two  about  some  of  the  details  of  their  rascally  business 
may  be  interesting  and  instructive. 

A  favorite  dodge  of  theirs  is  to  agree  to  pay  a  certain  price  for  a  lot 
of  butter,  cheese,  or  sometliing  of  the  sort,  a  sample  of  which  has  been 
sent  them  by  the  shipper,  and  then  "  beat"  the  shipper  out  of  a  part 
of  his  due  by  swearing  the  goods  are  not  up  to  the  sample.  A  hea\"j'^ 
and  most  imjust  reduction  is  thus  often  submitted  to,  rather  than  have 
a  quarrel,  or  have  the  goods  thrown  back. 

Another  ruse  of  the  cheats  is  to  make  lieavy  claims  for  rebate 
through  a  cooked-up  pretense  of  short  weight. 

But  their  best  hold  is  to  get  possession  of  the  goods  somehow  or 
other,  sell  them,  under  market  price,  burst  up,  and  clear  off  to  some 
new  field  for  a  commission  business. 

The  only  advice  in  conclusion  is,  that  it  behooves  all  banks,  shippers, 
dealers — all  decent  business  men — to  look  out  sharp  for  the  class  of 
swindlers  I  have  described — a  class  seemingly  on  the  increase. 
PUBLISHED    RATES   FOR   MONEY. 

There  is  nothing  more  confusing  to  the  mind  of  the  average  money 
borrower,  than  the  reports  of  rates  of  interest  upon  call  and  time  loans 
which  are  currently  made,  in  the  money  articles  of  the  commercial 
newspaper  to  which  he  pins  his  faith.  A  few  explanations  of  the 
difficulties  he  encounters,  as  he  endeavors  to  get  at  the  financial 
situation  through  an  inspection  of  a  daily  journal's  monetary  articles 
Avritten  by  one  who  has  long  been  familiar  with  the  work  of  getting 
up  the  articles  in  question,  may  be  of  value. 

When  the  financial  writer  quotes  rates  for  discount  of  paper,  he 
usually  has  in  view  paper  of  the  very  choicest  class,  of  the  standing  of 
which  there  can  be  no  question  whatever,  and  which  will  be  held  by 
parties  having  first-class  facilities  for  borrowing. 

Tlie  notes  which  tlie  average  business  man  offers  his  banK  are  not 
discounted  unless  it  is  believed  that  they  will  be  paid,  yet  they  may 
not  exactly  belong  to  the  class  of  paper  just  referred  to,  but  are  rather 
those  types  of  promises-to-pay  so  often  alluded  to  in  banking  circles  as 
being  a  fair  business  risk,  and  which  are  quite  sure  of  being  charged  1 
or  2  per  cent,  for  discount  above  the  iron-clad  quotation  of  the  money 
article.  These  differences,  between  real  and  nominal  rates  for  money, 
are  more  marked  in  the  London  money  market  than  in  this  country. 
Thus,  I  have  noticed  that  London  merchants  in  good  standing  were 
steadily  paying  4  and  5  per  cent.,  for  their  bank  discounts,  when  the 
London  ' '  Times  "  was  quoting  23^  per  cent,  as  the  Bank  of  England 
rate  for  60  days'  loans. 

The  same  apparent  inconsistencies  exist  in  the  market  for  mort- 
gages. The  borrower  reads  in  a  paper  that  money  upon  pledges  ot 
real  estate  can  be  obtained  for  terms  of  years  at  4  percent.,  yet  he 


EVERYDAY   QUESTIONS    AND    OTHEK    MATTERS.  425 

may  at  the  same  time  And  himself  paying  5  and  6  per  cent,  for  a  loan 
for  three  years  upon  the  very  house  he  is  living  in. 

In  quotations  for  advances  of  this  description,  the  figures  in  the 
newspaper  have  been  based  upon  operations  of  great  magnitude  made 
by  Savings  banks  and  trustees,  where  the  property  pledged  has  been 
of  the  choicest  chai*acter  and  the  advances  made  upon  it  perhaps 
not  over  40  per  cent,  of  its  assessed  value. 

In  the  call-loan  business  there  are  apparent  quotation  discrepancies 
which  need  a  word  or  two  of  explanation.  Call  loans  between  banks 
are  often  quoted  at  3  per  cent.,  when  the  individual  borrower,  upon 
first-class  securities,  is  called  upon  to  pay  his  bank  4  or  5  per  cent,  for 
demand  money.  The  first-named  between-bank  call-loans  are  of  large 
round  sums  of  minute  money  that  is  put  out  at  one  day  with  the 
full  understanding  that  it  is  liable  to  be  swept  in  the  next.  The 
merchant  who  borrows  call-money  from  a  bank  expects  to  call  and 
pay  it  when  it  becomes  convenient  to  do  so,  and  some  borrowers 
suppose  this  is  why  these  loans  are  described  as  "  call-money.'' 

There  is  one  other  point  relative  to  money  negotiations  to  be 
alluded  to.  The  business  man  who  reads  in  a  morning  paper  that 
money  is  a  perfect  drug,  and  that  rates  were  never  so  low,  often  finds 
it  hard  to  effect  a  discount,  even  at  rates  far  above  those  he  has  seen 
quoted  in  a  journal's  money  article,  simply  because  of  the  well-known 
fact  that  when  business  is  very  much  depressed  and  money  exceedingly 
sluggish,  banks  are  of  necessity  obliged  to  exercise  the  utmost  care  in 
discriminating  in  the  matter  of  credits. 

It  may  be  asked  very  natiirally  why  writers  of  money  articles  do 
not  give  these  varying  quotations  for  varying  types  of  loans,  discounts 
and  mortgages.  The  answer  to  this  can  be  given  by  saying  that  no 
well-managed  bank  or  savings  institution  is  in  the  habit  of  taking  on 
second-class  paper  or  second-class  mortgages,  nor  are  borrowers  willing 
to  concede  that  they  are  in  the  habit  of  offering  to  banks  either  second- 
class  notes  or  second-class  real  estate  security. 

But  there  are  in  our  money  markets  various  sorts  of  nominally 
first-class  paper  and  many  varieties  of  number  one  mortgages.  The 
shadings  of  rates  accompanying  negotiations  of  these  different  types 
of  vouchers  will  easily  be  discovered  by  the  borrowers  who  attempt  to 
make  them.  But  they  cannot  readily  be  classified  in  any  brief 
monetary  review. 

SAFETY    OF   LEGITIMATE    BANKING. 

Where  banks  are  managed  Avith  care  and  ability,  and  confine 
themselves  strictly  to  the  legitimate  business  of  banking,  they  not 
unf requently  run  along  for  many  years  without  losing  a  single  dollar 
from  their  loans. 

Under  the  old  State  system  of  banking,  when  the  banking  business 
■was  conducted  in  a  manner  somewhat  different  from  what  it  is  to- 
day, it  was  not  unusual  for   a   bank    to    move   along  for  fifteen  or 


426  PRACTiCAii  bai«:king. 

twenty  years  without  being  called  upon  to  charge  oil  a  single  dollar 
of  bad  debts. 

Instances  of  this  class  have  come  under  my  personal  observation. 

Banks  which  have  made  such  a  showing  as  this  have,  of  course, 
had  at  their  head  managers  of  the  most  faithful  and  skillful  character. 
In  illustration  of  this  point,  let  me  give  a  case  from  real  life  in  bank- 
ing which  at  this  moment  comes  to  mind.  There  is  no  need  of 
mentioning  names;  and,  besides,  this  case  has  so  many  parallels  that 
it  may  fit  well  in  instances  not  immediately  in  \'iew: 

The  President  of  the  bank  had  been  with  it  from  youth.  He 
had  served  in  all  its  offices  from  that  of  messenger  upward.  For 
forty  years  he  had  been,  while  acting  as  its  Cashier  and  President, 
its  principal  manager.  In  all  that  time  the  bank  had  never  paid 
less  than  8  per  cent,  in  annual  dividends;  had  often  paid  more; 
had  never  passed  a  single  semi-annual  dividend.  And,  since  the 
bank's  reorganization  as  a  National  bank,  some  twenty  years  ago, 
it  has  accumulated  a  surplus  one-half  as  large  as  its   capital. 

THE   POWER   OP   INTEREST. 

Few  persons,  even  among  those  who,  hke  bankers  are  continually 
up  to  their  eyes  in  interest  calculations,  fully  realize  the  rapidity  with 
which  interest  grows — accumulates — or  fairly  gauge  its  power.  Men 
who  give  notes  are  usually  men  of  years  and  experience.  Yet  those 
most  accustomed  to  the  issue  of  their  time  promises  to  pay,  are  quite 
ready  to  testify  that  there  is  no  better  reminder  of  the  rapidity  with 
which  time  flies  over  the  heads  of  busy  men  than  that  which  comes 
to  them  when  they  sign  a  note  of  hand  for  sixty  days.  And  interest 
which  grows  nights  and  days  and  Sundays  is  accumulating  as  steadily 
as  time  flies,  where  the  promises  bear  this  burden  of  rates. 

Not  long  ago  a  Savings  bank  book,  of  not  very  ancient  date,  say 
about  forty  years  old,  was  passed  around  among  a  circle  of  experienced 
bankers  as  a  curiosity.  It  bore  one  single  deposit  of  ten  dollars  made 
in  1840  in  one  of  our  best  Savings  banks.  The  original  deposit  of  ten 
dollars  had  not  been  disturbed.  It  had  rolled  itself  up  to  the  astonish- 
ing sum  of  87'5  or  thereabouts. 

Between  1820  and  1830,  a  man  put  one  hundred  dollars  into  a 
Savings  bank  near  Boston.  In  a  week  he  drew  it  out  and  surrendered 
his  pass-book.  By  an  error  his  account  was  not  charged  with  the 
withdrawal.  And  one  day  the  bank,  which  had  in  all  these  years  between 
1820  and  1884,  been  carrying  along  the  hundred  dollars,  adding  to  it 
each  six  months  its  interest,  discovered  the  error  they  had  made.  They 
stumbled  on  the  old.  cancelled  pass-book.  The  hundred  had  grown  to 
twelve  hundred,  which  was  at  once  covered  into  the  bank. 

CARE    OP    CERTIPICATES    OF    STOCK. 
Banks  should  take  the  very  best  care  of  all  stock  certificates  that 
come  into  their  hands — not    only   the    certificates  of  shares  of  their 


EVERYDAY   QUESTIONS    AND    OTHER    MATTERS.  437 

own  stock,  but  stuck  certiflcates  of  all  sorts.  It  is  one  of  the 
very  first  principles  in  making  transfers  of  shares  on  the  books  of 
a  corporation,  and  issuing  new  certificates,  to  demand  and  take 
possession  of  the  old  certiflcates. 

In  making  a  transfer  of  stock  on  one  occasion,  the  intelligent 
lawyer  who  happened  to  be  acting  as  attorney  in  the  transfer  told 
me,  as  he  passed  me  over  the  old  certificate,  a  little  incident  directly 
illustrating  this  point  of  the  necessity  of  taking  the  best  care  of  a  class 
of  property  which  is  so  often  deemed  valueless  except  in  the  hands  of 
its  rightful  owners.  He  had  been  calling  upon  a  client  of  liis,  who 
was  a  prisoner  in  jail  for  stealing  a  parcel  of  property,  a  portion  of 
which  was  stock  certificates.  He  asked  the  prisoner  why  in  the  world 
he  took  those  share  certiflcates,  when  he  knew  they  could  be  of  no 
earthly  use  to  him,  since  no  corporation  would  transfer  them,  except 
for  their  rightful  owner,  and  that  the  loser's  advertisements  would  at 
once  put  the  corporations  on  their  guard.  The  rogue  replied  that  he 
found  that  there  were  parties  in  New  York  who  made  a  practice  of 
buying  such  stolen  certiflcates,  at  a  cheap  price,  which  certificates  they 
were  in  the  habit  of  selling  to  very  ignorant  investors,  who  could  be 
easily  convinced,  by  the  affixing  of  some  sort  of  a  transfer  on  their 
backs,  that,  in  buying  the  certificates,  they  really  got  good  property. 

This  sort  of  fraudulent  traffic  naturally  reminds  one  of  the  well- 
known  fact  that  there  are  in  our  cities  parties  who  buy  and  sell 
perfectly  worthless  railroad  and  miscellaneous  bonds.  This  traffic  is 
based  upon  the  curious  fact  that  there  is  a  steady  demand  for  these 
bonds  to  make  up  assets  in  cases  of  scandalous  failures. 

NOVEL   METHOD    OF   IDENTIFICATION. 

Good  banking  often  requires  payment  of  checks  on  identification 
by  signatures.  The  California  Bank,  of  San  Francisco,  advises  Doe  & 
Co. ,  of  Baltimore,  that  it  has  drawn  a  check  on  them  for  one  thousand 
dollars  in  favor  of  Robert  Smith.  The  payee  being  acquainted  with  no 
one  in  Baltimore,  the  bank  takes  his  signature  and  forwards  it  with 
the  advice  of  the  check  to  Doe  &  Co. ,  thus  leading  them  to  infer  that 
they  are  to  accept  a  comparison  of  signatures  as  a  method  of 
identifying  the  payee.  When  the  payee  presents  himself  he  is  identified 
in  this  manner  if  other  circumstances  tend  to  favor  his  case — that  is, 
if  the  man  seems  all  right  and  there  is  nothing  to  excite  suspicion. 
There  is  another  method  of  procedure  of  a  somewhat  novel  type, 
adopted  by  some  bankers  when  a  payee  desu*es  to  travel  with  his  check 
into  a  strange  country  and  wishes  to  be  sure  of  collecting  it  when  he 
gets  there.  In  order  to  place  an  obstacle  in  the  way  of  fraud.  Cashiers 
have  sometimes  given  the  payee  an  oral  password  which  he  could  use 
as  an  identification  or  as  the  complement  of  an  identification  by  signa- 
ture— in  the  latter  case  both  password  and  signature  being  communi- 
cated to  the  drawee  in  the  letter  of  advice. 

In  the  transaction  of  business  by  Letter-of-Credit  methods,  identifi- 


428  PRACTICAL    BANKING. 

cation  by  signature  becomes  very  necessary  and  important.  There 
may  be  some  risk  in  the  operation,  yet  it  is  what  should  be  considered 
a  ftxir  business  risk  and  proper  under  certain  circumstances.  The 
password  idea  would,  however,  lessen  the  risk  and  should  work  just  as 
well  with  a  Letter  of  Credit  as  with  a  cheek. 

WORSE  THAN  A  DEFAULTER. 
There  was  very  serious  trouble  in  the  Bank.  It  was  dis- 
covered that  the  Receiving-Teller  and  Book-keeper,  who  appeared  to 
have  worked  together  dishonestly  for  a  long  time,  had  lied,  leaving 
behind  them  a  defalcation  of  stupendous  size  for  those  times,  amount- 
ing to  more  than  two  hundred  thousand  dollars.  The  bank  was  under 
the  management  of  an  able  Board  of  Directors,  and,  as  its  business 
was  very  extensive,  it  had  a  large  corps  of  oflBicers.  The  excitement  in 
the  management  of  the  bank,  among  its  clerks,  and  in  the  community, 
on  discovering  the  defalcation,  was  very  great.  Not  long  after  this 
explosion,  and  while  the  Directors  were  still  delving  into  the  ruin  it 
had  left  in  its  track,  the  very  kind-hearted  President  of  the  suffering 
institution  called  into  his  private  room  the  youngest  clerk  in  his  bank, 
a  young  man  about  21,  who  was  a  general  assistant  on  a  salary  of  $500. 
The  old  gentleman  and  the  junior  clerk  sat  down  before  an  open  fire 
in  the  little  room.  The  President  then  took  from  his  pocket  a  letter, 
and  in  a  pleasant,  fatherly  manner  read  it  to  the  clerk.  Its  contents 
were  to  the  effect  that  the  junior  officer  knew  all  about  the  defalcation 
while  it  was  being  worked  up,  and  had,  in  fact,  been  a  partner  in  it, 
participating  in  its  proceeds.  The  President,  having  read  this  missive, 
passed  it  over  to  the  clerk,  wlio  saw  at  once  that  this  production, 
which  was  anonymous  and  written  in  a  disguised  hand,  was  in  writing 
familiar  to  him.  He  told  the  President  that  the  letter  was  evidently 
written  by  an  acquaintance  of  his,  who  was  a  clerk  in  another  bank 
on  the  street,  and  who  had  had  a  falling  out  with  him  in  some  matter 
connected  witli  an  election  in  a  society  to  which  they  both  belonged, 
and  that  he  hoped  lie  had  no  need  of  saying  that  its  statements  were 
false  in  every  particular.  The  good  President  did  not  seem  to  need 
any  assurance  of  this,  for  he  tore  the  letter  in  small  pieces  and  threw 
them  into  the  fire,  saying  no  one  but  himself  had  seen  the  letter  and 
no  one  should  ever  hear  more  of  it.  The  young  clerk  remained  at  that 
bank  till  he  reached  the  highest  position  in  it.  The  writer  of  the 
anonymous  letter  soon  after  became  a  defaulter  to  a  large  amount  and 

fled  the  country. 

SYSTEM    AND    ORDER. 

A  manager's  desk  should  be  arranged  in  a  neat  and  orderly 
manner.  All  papers  and  documents,  not  in  immediate  use,  should  be 
filed  away  in  their  proper  places.  Nothing  tends  more  directly  to 
confusion  and  delay  in  the  administration  of  any  department  than  a 
habit  of  keeping  the  desk  lumbered  with  a  mass  of  old  papers,  cir- 
culars and  documents  of  all   sorts.     As  soon  as  possible  all  matters 


EVERYDAY    Ql'ESTIOXS    AXD    OTHER    MATTERS.  429 

requiring  attention  should  be  attended  to,  and  the  papers  related 
thereto  passed  over  to  the  proper  officers,  or  into  the  proper  files,  and 
the  deck  cleared,  as  it  were,  for  any  fresh  action. 

"Without  doubt  there  are  bankers  who  have  an  idea  that  a 
crowded  and  overflowing  desk  indicates  a  vast  mass  of  business  on 
hand  and  being  transacted,  but,  to  the  experienced,  such  signs  show  a 
want  of  a  proper  executive  faculty  and  the  absence  of  prompt  and 
orderly  ways  of  doing  things. 

The  kings  of  business  in  this  world — ^the  men  who  are  the  moving 
powers  behind  transactions,  mercantile  and  financial,  of  the  most 
extensive  and  complicated  character — are  often  men  who,  from  a 
surface  view,  appear  the  least  busy  and  the  best  prepared  to  take 
direct  hold  of  any  matter  really  deserving  their  immediate  attention. 

I  have  in  mind,  at  this  moment,  one  of  the  strongest  and  most  suc- 
cessful business  men,  whose  operations  are  of  the  most  extensive 
character,  who  has  all  his  matters,  both  those  of  detail  and  those  of 
the  widest  scope,  so  well  in  hand  that,  when  in  the  midst  of  business, 
he  never  seems  in  a  hurry — never  seems  pressed  by  anything.  On  his 
desk  are  but  a  few  papers.  Those  few  will  be  rapidly  attended  to,  to 
give  place  to  the  next  things  demanding  liis  notice.  ' 

CIVILITY  TO  DEPOSITORS. 
Some  bank  officers  in  the  discharge  of  their  daily  duties  are  brought 
more  than  others  in  contact  with  the  customers  of  the  bank.  But 
each  individual  clerk  of  any  bank  is  almost  daily  called  upon  to  repre- 
sent his  institution  in  a  more  or  less  prominent  way  in  dealing  with 
depositors  and  general  patrons.  There  is  nothing  more  important 
than  the  practice  upon  the  part  of  bank  officers  of  courtesy  and 
propriety  in  all  business  intercourse.  The  prosperity  of  their  bank 
and  their  own  reputation  largely  depend  upon  the  character  of  their 
personal  address.  Though  fully  recognizing  these  facts,  it  would 
hardly  be  fair  to  recommend  to  bank  managers  the  adoption  of  a  plan 
for  maintaining  suitable  pohteness  and  civility  in  their  corps  of  officers 
which  has  been  adopted  by  one  enterprising  and  most  successful  bank. 
The  bank  in  question  has  pasted  upon  its  pass-books  the  following 
notice:  "Depositors  will  please  report  to  the  Cashier  any  want  of 
civility  upon  the  part  of  the  Tellers,  etc.,  of  this  bank."  A  business 
man  whose  attention  was  called  to  this  item  of  financial  literature 
rather  emphatically  characterized  it  as  being  of  the  horse-car 
description.  Without  wishing  to  condemn  this  attempt  to  place 
matters  in  good  trim  in  the  sphere  of  duties  thus  supervised,  the 
opinion  must  be  expressed  that  this  printed  request  is  one  of  the 
things  that  should  be  left  off  the  covers  of  bank  pass-books. 

DANIEL  WEBSTER    ON    STATE   STREET. 
An  office  view  has  been  given  of  Daniel  Webster,  showing  him  as 
he  appeared  when  the  bank  messenger  called  upon  him  to  collect  a 


430  PRACTICAL    BAXKIXG. 

draft.     Here   is   a  recollection   of    Mr.   Webster    on  'Change— as  he 
appeared  during  one  of  his  infrequent  visits  to  State  street  : 

In  appearance,  general  style  and  carriage  Mr.  Webster  was  one  of 
the  most  remarkable  men  ever  seen  on  that  street.  And  he  was  about 
the  only  man  whom  the  people  on  'Change  seemed  anxious  to  get  a 
good  look  at  when  he  came  among  them.  When  he  made  his  appear- 
ance on  State  street  the  word  would  quickly  spread  that  Mr.  Webster 
was  coming,  and  all  would  want  to  see  him.  His  presence  was  majestic 
and  entirely  unlike  that  of  most  men.  He  seemed  to  move  among  the 
crowd  as  if  apart  from  it  and  not  of  it — as  one  belonging  to  some  other 
order  of  existence.  He  would  pa^s  along  with  slow  and  dignified  step, 
his  hat  drawn  low  over  his  broad  forehead  and  his  deep-set  eyes 
looking  out  from  under  his  shaggy  eye-brows  in  a  kind  of  dreamy  way 
as  if  their  owner  found  little  that  was  congenial  in  the  moving  panorama 
about  him.  His  commanding  form  and  impressive  manner  would 
cause  the  most  indifferent  stranger  to  turn  at  once  to  look  at  him  and 
ask  the  nearest  person  who  he  was. 

BREASTING    A    PANIC. 

The  old  gentleman  had  been  for  many  years  the  President  of  a 
leadmg  Boston  bank.  In  his  old  age  he  was  fond  of  telling  a  story  of 
his  experience  with  a  panic  and  a  panic-stricken  man.  It  happened  at 
least  fifty  years  ago,  at  a  time  when  merchants  daily  congregated  on 
'Change  in  the  open  street  at  2  o'clock  or  thereabouts — met  there  to 
look  at  each  other,  make  trades  and  talk  over  business  affairs.  It  was 
a  time  of  prostration  in  business.  Everybody  was  depressed  over  the 
situation.  Failures  were  frequent.  The  credit  of  the  strongest  houses 
was  shaken.  The  banks  had  become  deeply  alarmed,  and  hardly 
knew  whom  to  trust.  In  the  midst  of  this  tremendous  financial 
excitement  and  distress  one  of  the  best  known  merchants  in  the  city 
came  to  the  bank  President  we  have  named  and  told  him  that  he 
believed  he  should  have  to  fail  to-morrow — that  he  had  notes  then 
due  which  he  thought  he  should  have  to  let  go  to  protest.  The 
President  knew  his  man  quite  well — knew  his  financial  condition  and 
prospects — so  he  unhesitatingly  gave  him  this  advice  :  He  told  him 
he  could  pull  through  easily  enough  if  he  would  only  keep  up  his 
courage  and  show  a  bold  front.  He  explained  to  him  that  he  was  a 
marked  man  in  the  business  community,  who  was  owing  considerable 
money,  which  he  might  be  suddenly  called  upon  to  pay  if  his  creditors 
lost  confidence  in  him.  The  bank  President's  simple  recommendation 
was  that  he  go  on  'Change  every  day  regularly  and  promptly,  and 
walk  up  and  down  there  in  the  most  cheery  and  indifferent  manner — 
make  himself  conspicuous  as  a  happy  and  hopeful  man  as  long  as  the 
panic  continued.  The  alarmed  merchant  was  a  man  of  ability  and 
real  financial  stability.  By  following  the  course  advised  he  passed 
unscathed  through  the  fire  of  the  financial  trial  and  also  helped  others 
along.     In  the  midst  of  the  depression  he  was  pointed  out  as  a  tower  of 


EVERYDAY   QUESTIOXS    AND    OTHER    MATTERS.  431 

financial  strength.     Only  two  men  knew  how  near  he  came  to  failing — 
the  President  of  the  bank  and  himself. 

DEPOSIT   EARLY. 

It  is  a  good  custom  for  persons  who  keep  bank  accounts,  or  who 
have  any  occasion  to  transact  business  with  banks,  to  do  all  their 
business  with  their  banks  as  early  in  the  day  as  possible.  If  notes  are 
to  be  paid,  pay  them  early ;  if  checks  are  to  be  drawn,  draw  them  early ; 
and,  if  deposits  are  to  be  made,  make  them  early. 

Such  a  way  of  attending  to  banking  is  altogether  more  comfortable 
and  easy  for  the  dealer.  In  his  visits  to  the  bank,  in  the  first  hours  of 
the  day,  he  will  Invariably  find  the  bank  officers  better  situated  to 
attend  to  all  his  wants  in  the  promptest  and  most  cheerful  manner, 
than  he  will  later  on  when  "the  rush  and  tear  of  traffic  has  wearied  and 
harassed  them,  and  when  their  counters  are  thronged  by  the  chronic 
laggards — customers  who  would  be  the  last  if  the  bank  hours  extended 
into  midnight. 

A  proper  regard  for,  and  appreciation  of,  bank  officers  and  their 
duties,  should  also  lead  customers  to  attend  to  their  daily  banking  at 
as  early  an  hour  as  they  conveniently  can. 

The  counter  work  of  a  bank  is  often  but  the  beginning  of  the  work 
which  has  daily  to  be  done  by  bank  officers,  and  the  nominal  business 
hours  of  the  bank  are  often  no  gauge  of  the  time  of  labor  of  those 
employed  there. 

The  hardest  and  longest  labor  has  sometimes  to  be  performed  after 
the  dealings  with  customers  are  at  an  end — labor  in  sorting,  counting, 
corresponding,  recording,  settUng  of  cash,  and  settling  of  books ;  and 
those  customers  of  a  bank  who,  by  their  promptness,  give  the  bank 
officers  an  early  start  on  this  kind  of  work  do  much  towards  helping 
them  along  with  their  daily  work. 

SECURITY  FOR  NATIONAL  BANK  DEPOSITS. 
The  plan  suggested,  a  few  years  ago,  that  the  United  States  Gfovern- 
ment  should  set  aside  as  security  for  deposits  the  money  received  from 
the  banks  as  tax  on  circulation,  together  with  the  profits  accrumg  to 
the  Treasury  from  circulation  which  never  comes  home  for  redemption, 
is  one  which  ^vill  probably  secure  attention.  Depositors  in  National 
banks  have  lost,  since  the  National  system  started,  some  $17,000,000 
or §18,000,000  by  failures  of  banks.     Here  are  three  facts  of  interest: 

1.  The  taxes  paid  each  year  to  the  Goverument  on  circulation  have  been  mtich 
more  in  every  instance  than  the  losses  for  the  corresponding  year  by  depositors  in 
National  banks. 

2.  The  taxes  paid  on  circulation,  since  1865,  exceed  by  more  than  fifty  per  cent, 
the  total  amount  of  proved  claims  against  insolvent  National  banks  for  the  same 
time,  so  that,  if  the  insolvent  National  banks  had  had  no  assets  whatever,  this  tax 
would  have  paid  all  their  depositors  and  left  .$19,877,181  in  the  Treasury,  excluding 
interest. 

3.  The  taxes  paid  on  circulation  are  more  than  six  times  the  losses  incurred  by 
the  public  from  insolvent  National  banks,  and  if  these  taxes  had  been  applied  to  the 


482  PRACTICAIi    BACKING. 

payment  of  such  losses,  as  is  contemplated  by  a  measure  recently  brought  to  the 
attention  of  Congress,  such  losses  would  have  been  paid  in  full,  and  the  fund  remain- 
ing would  amount  to  §48,832,438,  disregarding  accumulated  interest. 

"ULTRA  VIRES." 

There  are  few  legal  phrases  more  often  used  in  banking  than  the 
one  which  heads  this  paragraph.  Translated,  it  reads,  of  coiu'se, 
"beyond  their  strength — beyond  their  powers."  Many  a  section  of 
this  volume  has  shown  what  duties  and  offices  were  mthin,  and  what 
not  within,  the  scope  of  banks  and  the  various  officers  of  banks. 
And  the  lawsuits  which  have  taken  place  over  these  matters  have  been 
of  the  most  varied  and  important  character.  The  latest  ease  coming 
under  immediate  observation  illustrates  in  an  amusing  manner  the 
contests  which  may  arise  on  such  a  point : 

The  bank  had  made  a  bad  failure— Mabilities  large  and  assets  small. 
The  President  and  Cashier  attempted  to  sell  the  safe  belonging  to  the 
bank  to  raise  money  to  meet  the  creditor's  demands.  The  point  was 
raised  that  the  power  to  sell  the  old  safe  did  not  inhere  in  President  or 
Cashier — that  only  the  shareholders  could  make  the  sale.  The  final 
grave  ruling  of  the  high  Court,  to  whom  the  question  was  referred, 
sustained  this  point  by  deciding  that  Presidents  and  Cashiers  have  no 
right,  under  the  circumstances  described,  to  trade  off  plant. 

POWERS    OF   ATTORNEY   WHICH   ARE   NOT   REVOCABLE. 

The  bank  was  asked  to  make  a  loan  upon  some  registered  bonds 
belonging  to  a  borrower  in  a  distant  State.  The  applicant  for  the  loan 
sent  to  the  bank  a  properly  drawn  and  signed  note  for  the  amount 
he  wished  to  borrow  and  the  bonds  he  was  offering  as  collateral,  the 
latter  accompanied  by  his  power  of  attorney  for  the  execution  of  their 
transfer.  In  considering  the  matter  two  points  of  objection  were  raised. 
The  first  was,  that  there  was^nothing  to  prevent  the  signer  of  the  power 
of  attorney  from  issuing  another  power  of  the  same  tenor  to  some  other 
party,  thus  rendering  the  first  power  of  no  value.  This  point  was  not 
well  taken,  since  no  transfer  could  be  obtained  without  the  possession 
of  the  bonds,  and  these  were  in  the  hands  of  the  bank  now  considering 
the  loan.  This  point  is  often  raised  by  comparatively  inexperienced 
negotiators  who  seem  to  be  unaware  of  the  worthlessness  of  powers  of 
attorney  unaccompanied  by  the  original  vouchers — the  share  certifi- 
cates, registered  bonds,  etc.,  to  which  the  powers  may  be  applied.  The 
other  objection  raised  against  the  documentary  security  was  as  to 
the  value  the  power  would  be  to  the  bank  in  case  of  the  death  of 
the  borrower  whose  signature  it  bore.  This  was  a  point  worthy  of 
more  serious  consideration  than  the  one  {suggested.  The  power  of 
attorney  tendered  was  a  simple  power  of  transfer  of  the  common  type. 
Whenever  powei-s  of  attorney  confer  an  interest  in  the  subject  matter 
only  and  not  in  the  results,  and  constitute  an  essential  part  of  a  security 
upon  the  faith  of  whicli  money  or  other  thing  has  been  advanced  or 
liability  incurred,  they  are  not  revocable,  even  by  the  death  of   the 


EVERYDAY    QUESTIONS    AND    OTHEll    MATTERS.  433 

principal,  but  may  be  thereafter  executed  where  it  can  be  done  without 
the  name  of  the  principal. 

In  view  of  the  correctness  of  the  legal  principles  laid  down,  the  bank 
concluded  to  ask  the  applicant  for  a  power  of  attorney  coupled  with  a 
conveyance  of  interest,  and  here  is  a  copy  (see  Form  90),  of  the  very 
satisfactory  one  which  they  received  that  can  be  used  with  safety  in 
similar  cases  : 


For  value  received  I  hereby  sell,  transfer  and  assign  to  the 

C9.6o4^Ajif.  J\  xvJZxjO-Ajv.XiJL  DoOL-v^^ 

jJLo-^o^jo^  ttv.xkJxj6.><xjiA^  JLxJJLo.^^  ($  I   I  ,000) registered  water 

bonds  of  the  to\yn  of  Mansfield,  County  of  Nampden,  Md.,  dated... 

^-cloo..^u^x3^_^-AJ.    1  ,    1  ^§"5 being  of $500 each,  and  numbered 

as  follows : 

and  authorize XoL.jo^j^.    J\V.  ^^cljo^jl^ to  make  the  transfer  on  the 

books  of  said  town. 

Witness  my  hand  and  seal  the 1  OiJv day  of ^.>u.jv/oi_j 

A.  D..... 1^C|0. 


Witness.. £=.    Ca..    ciLf^-yk j,  jvi.  JORDOfJ. 


Seal. 


NATIONAL.  BANKS   ASKING   FOR   AN    EXTENSION. 

This  seems  rather  an  ominous  expression.  But  it  does  not  in  this 
instance,  mean  anything  very  disagreeable,  as  the  explanations  will  show. 

The  charters  of  almost  all  of  the  National  banks  were  for  the  term 
of  20  years,  so  that  many  of  them  have  already  reached  that  limit  and 
others  are  coming  to  it  every  month. 

An  act  of  Congress  of  July  12,  1882,  provides  means  for  the 
extension  of  the  corporate  existence  of  the  banks.  With  a  few 
exceptions,  the  National  banks  of  the  country  will  avail  themselves 
of  these  measures.  I  propose  to  explain  in  a  few  words  just  how 
they  do  tliis.  The  law  in  question  provides  that  this  renewal  can  take 
place  any  time  within  two  years,  that  is,  previous  to  the  date  of  the 
expiration  of  their  old  charter.  The  first  action  must  be  taken  by  the 
Directors  of  the  bank  proposing  to  extend  its  life.  They  must  vote  to 
advise  the  shareholders  of  their  banks  to  avail  themselves  of  the 
privilege  of  extending  the  corporate  existence  of  their  Institution  by 
amending  its  articles  of  association  in  accordance  with  the  pro^'ision 
of  the  extension  act  I  have  named.  Having  passed  this  vote,  the 
next  thing  is  the  issue  of  a  circular  notice  to  every  shareholder  in  the 
bank,  asking  consent  in  writing  to  the  extension  amendment  named. 


434  PRACTICAIi   BACKING. 

These  replies  will  be  made  by  calls  at  the  bank  in  person,  Avhere  the 
necessary  papei's  will  be  signed,  or  by  sending  in  powers  of  attorney 
authorizing  the  signatures.  In  case  of  Savings  banks,  and  all  other 
corporations,  which  are  shareholders,  a  copy  of  vote  of  the  Directors, 
Trustees,  or  Finance  Committee,  authorizing  the  President  or  Treasurer 
to  sign,  must  be  filed  with  the  National  bank.  Executors,  adminis- 
trators, guardians  and  trustees  must  also  file  a  certificate  of  their 
appointment  from  the  Probate  Court. 

The  powers  of  attorney  used  in  this  extension  consent  are  of  the 
ordinary  form,  and  must  be  witnessed. 

Where  the  consent  of  the  necessary  two-thirds  has  been  obtained, 
non-consenting  shareholders  have  the  right  to  ^vithdraw  and  to  receive 
fi'om  the  extending  bank  the  duly  appraised  value  of  the  shares.  And, 
if  these  withdrawing  shareholders  are  not  satisfied  with  the  •  first 
appraisal  provided  for  by  the  law,  they  may  appeal  to  the  Comptroller 
of  the  Currency  for  a  revision  of  the  appraisal. 

The  last  item  of  this  extension  business  is  an  application  to  the 
Comptroller  for  an  approval  of  the  adopted  extension  amendment. 
This  he  grants,  after  his  examiner  has  thoroughly  examined  the  apply- 
ing bank,  and  found  it  "all  solid." 

It  has  been  mentioned  that  the  Bank  Act  provides  that  the  National 
banks  can  go  through  these  extension  movements  any  time  within  two 
years  of  the  date  of  the  expiration  of  their  charters,  and  it  may  be 
asked,  when  is  the  wisest  time  to  begin  to  re-organize  ?  That  depends 
upon  circumstances;  but  it  is  well  to  take  hold  of  the  matter  a  little 
earlier  than  there  seems  any  real  necessity  for  so  doing,  on  account  of 
unexpected  hitches  that  may  turn  up.  There  is  always  the  possibility 
of  delays  from  the  absence,  in  distant  countries,  of  large  shareholders, 
whose  signatures  of  assent  may  become  a  necessity.  Then,  again,  it 
must  always  take  some  little  time  for  corporate  shareholders  to  execute 
the  necessary  assent  papers.  It  should  also  be  borne  in  mind  that  bank 
shareholders,  of  all  classes,  are  apt  to  be  slow  in  attending  to  matters 
of  the  description  in  question;  and,  as  in  the  ease  where  share- 
holders' meetings,  and  similar  matters  are  to  be  attended  to,  may  need 
a  deal  of  drumming  up.  Individual  banks  can  judge  best  their  own 
situation ;  but  not  less  than  three  months  had  better  be  taken  for  the  ex- 
tension work,  while  in  many  cases  six  months  would  be  a  wiser  provision. 

But  time  moves  rapidly  with  busy  banks.  They  nmst  not  forget  to 
attend  to  this  business  in  season;  and  those  banks  which  can  so 
arrange  the  business  will  do  well  to  have  the  papers  ready  to  present 
to  shareholders  when  they  come  for  their  semi-annual  dividends. 

CONFIDENCE. 

The  whole  fabric  of  banking  rests  upon  confidence.  Banks  and 
private  lenders  loan  their  funds  upon  promises  to  pay,  about  which 
they  can,  as  a  general  thing,  and  from  the  nature  of  things,  have 
little  really  precise  and  positive  information.    And,  in  this  connection, 


EVERYDAY   QUESTIONS    AND    OTHER    MATTERS.  435 

let  me  say  that  there  are  many  who  have  httle  idea  of  the  extent  to 
which  banks  are  wilhnij:  to  rely  upon  tlie  apparently  honest,  frank 
and  open  statements  of  dealers  who  are  borrowei's — applicants  for 
loans — regarding  their  own  present  financial  condition  and  prospects. 
The  man  who  wishes  for  a  discount  is  certainly  better  acquainted  with 
his  own  monetary  situation  than  is  any  outsider ;  and  it  is  the  com- 
monest thing  in  the  world  for  the  managers  of  a  bank,  who  are 
considering  a  loan  application,  to  question  the  apphcant  regarding 
his  means  and  schemes,  and  to  rely  largely  upon  the  borrower's  own 
report  of  his  financial  standing.  Mercantile  Agencies,  institutions 
which  are  exceedingly  useful  as  aids  to  the  banks  in  the  work  of  discrimi- 
nating in  the  matter  of  credits,  know  well  the  value  of  personal 
interviews  with  business  men  in  making  up  theu*  ratings ;  and  these 
agencies  invariably  go  to  head-quartei's,  as  well  as  to  other  quarters, 
when  they  are  endeavoring  to  come  to  a  judgment  in  regard  to  the 
means,  integrity  and  general  credit  value  of  business  men. 

Banks  which  have  large  lines  of  paper  of  a  name  that  is  in  question, 
will  send  for  the  maker  of  the  paper,  in  the  time  of  doubt  and  anxiety, 
and,  after  a  careful  conference  with  the  individual,  will,  on  the  strengtli 
of  the  confidence  inspired  by  his  own  showing,  just  as  like  as  not 
conclude  to  help  liim  along  through  the  pinch  which  is  about  him  by 
loaning  liim  more  money.  There  is  no  experienced  banker  who  cannot 
recall  any  number  of  instances  of  this  sort.  And  private  lenders  will, 
as  every  one  knows — private  lenders  who  have  a  fondness  for  investing 
in  time  paper — sleep  easily  on  files  of  notes  with  single  names,  in  which 
they  steadily  keep  about  all  the  capital  they  have,  although  they  can 
have  little  positive  knowledge  of  the  strength  of  their  makers.  They 
have  full  confidence  in  these  men,  beUeve  what  they  say  about  them- 
selves, and  have  faith  in  the  correctness  of  that  common  judgment  of 
the  business  commimity  which  gives  their  men  a  high  reputation  for 
honesty,  and  beheves  in  their  ability  to  meet  their  engagements.  All 
this  is  very  much  to  the  credit  of  the  human  race — of  human  nature. 

Banks  do  not  seem  to  beheve  in  the  existence  of  total  depravity, 
except  in  occasional  individual  cases — in  instances  where  men  have 
willfuUy  and  persistently  made  false  pretenses,  and  thereby  succeeded 
in  defrauding  trusting  bank  managers  by  borrowing  money  which  they 
knew  they  could  never  pay,  and  never  intended  to  pay;  or  where 
trusted  clerks,  in  responsible  positions,  have  violated  all  sense  of  honor 
and  honesty  by  stealing  the  property  of  unprotected  shareholders. 
ABSENCE    OP    CONFIDENCE. 

A  money — a  business — panic  is  a  sudden  and  serious  alarm  without 
sufficient  cause.  In  times  of  panic  all  confidence  seems  to  be  lost.  The 
deposits  of  the  banks  reel  and  sink  because  depositors  become  anxious 
about  the  safety  of  their  deposits — lose  confidence  in  the  strength  and 
stability  of  institutions  in  which  they  have  long  trusted. 

Under  the  old  State  system  of  banking,  circulation  %vas  the  first  to 


436  PRACTICAL    BANKING. 

feel  the  effects  of  a  wild  panic.  Bill-holders  "who  had  never  before 
doubted  the  ability  of  the  issuing  banks  to  redeem  their  notes,  would 
suddenly  lose  all  confidence  in  this  ability,  and,  as  a  result,  the  bank 
notes  would  come  tearing  home  for  redemption  in  crushing  amounts. 

Shrinking  resources  and  distrust,  in  these  periods  of  panic,  combine 
to  prevent  the  banks  from  discounting ;  and  causes  of  precisely  the  same 
character  lead  to  increased  apphcations  for  loans  and  discounts.  The 
confusion  and  alarm  is  deepened  by  the  idle  and  malicious  gossip  of 
the  quidnuncs  of  the  street,  whose  principal  occupation  is  that  of 
reporting  financial  failures,  and  rumors  of  failures,  and  bruiting 
gloomy  prognostications — prophecies  of  worse  things  to  come.  In  such 
times  as  these,  the  best  of  business  men  will  lose  their  heads,  and  the 
best  managed  banks  make  mistakes,  under  the  influence  of  the  excite- 
ment in  which  they  are  enveloped.  Banks,  which  might  just  as  well 
as  not  discount  for  good  customers,  will  shut  their  discount  sheets,  and 
wait  to  see  how  "things  are  coming  out,"  and  customers  who  have 
not  the  shghtest  need  of  a  loan  will  press  forward  to  get  one,  asking, 
as  likely  as  not,  for  twice  as  much  money  as  they  have  any  hope  of 
getting,  for  they,  too,  have  lost  all  confidence,  and  think  it  best  to 
prepare  for  the  very  worst. 

These  are  only  a  few  of  the  features  of  a  monetary  panic  through 
which  we  pass  once  in  about  ten  years — periods  of  fright  and  disaster 
to  which  we  look  back  with  wonder  that  such  a  general  want  of 
confidence  could  have  prevailed. 

BANKS   AND   THE   CLERGY. 

I  have  had  occasion  in  those  pages  to  make  mention  of  the  financial 
peculiarities,  tastes  and  leanings  of  the  various  classes  of  depositors 
and  outside  custom^ers  with  which  the  practical  banker  is  daily  brought 
in  contact. 

There  is  a  point  of  interest  in  these  premises  to  which  I  again  wish 
to  allude.  In  making  comparisons  of  individual  tastes  and  traits,  as 
shown  in  banking  and  financiering,  the  conclusions  reached  must  be 
of  the  most  general  character.  All  rules  have  their  exceptions;  and 
when  we  attempt  to  describe  the  busmess  ways  of  a  class,  it  must 
be  borne  in  mind  that,  in  each  and  every  class,  there  are  prominent 
exceptions  to  the  average  exponent  of  that  class.  There  are,  for 
illustration,  women  who  are  thorough  women  of  business — scholars 
who  are  as  shrewd  and  practical  in  their  ideas  regarding  trade  and 
finance  as  if  they  had  been  trained  to  commerce  or  shop-keeping;  and 
clef gy men,  the  class  of  whom  we  are  now  to  say  a  financial  word,  who 
are  most  competent  managers  of  money  matters.  But,  as  a  rule, 
ministers  are  not  strong  in  this  direction.  It  is  not  reasonable  to 
expect  that  they  should  be  so.  Their  training  has,  by  force  of  circum- 
stances, been  of  an  unworldly  character.  In  their  active  life  they  are, 
to  be  sure,  brought  in  close  contact  with  men  of  business,  yet  the  view 
they  get  of  them  is  narrow  and  one-sided.     They  move  among  men  who 


EVERYDAY    QUESTIONS    AND    OTHER    MATTERS.  437 

have  met  with  various  degrees  of  worldly  success,  yet  they  are  apt  to 
see  most  of  those  who  have  won  the  prizes  in  the  struggle  for  material 
things.  These  they  fall  in  with  when  they  are  out  of  the  harness  of 
business  and  surrounded  by  the  happy  results  of  their  business  strug- 
gles. At  such  times  there  are  few  opportunities  for  becoming 
acquainted  with  the  nature  of  the  strife  through  which  the  successful 
business  man  has  passed  as  he  was  making  his  way  to  fortune.  And 
the  result  is  apt  to  be,  on  the  whole,  that  the  average  clergyman  has 
an  idea  that  it  is  a  comparatively  easy  thing  for  the  average  business 
man  to  make  money — to  make  a  good  deal  more  than  any  minister  can 
by  preaching  and  saving.  Thrown  thus  among  the  wealthy  and 
successful  people  of  trade,  the  preacher  often  becomes  over-anxious 
to  accumulate  for  himself.  And,  with  his  half-knowledge  of  business 
matters,  combined  with  an  undue  anxiety  after  accumulations,  he 
is  seldom  content  with  those  extremely  safe  investments  which  pay 
low  rates  of  interest.  As  a  result,  his  savings  are  often  placed  in  those 
insecure  spots  Avhich  promise  large  interest,  but  end  often  by  wrecking 
the  principal? 

The  experienced  banker  who  has  been  thrown  much  among  invest- 
ment-seeking clergymen  must  have  noticed  that  they  have  generally 
been  hard  persons  to  counsel,  since  they  have  usually  before  them 
the  two-fold  aim — an  aim  very  difficult  to  reach — of  getting  high  rates 
with  iron-clad  security. 

WOMEN    AT   BANKING. 

Men  who  are  fond  of  making  Mght  of  the  financial  abilities  of 
■women  are  expected  to  tell  the  following  old — very  old — story : 

Her  husband  always  kept  a  good  balance  with  his  bank — the  bank 
where  he  simply  kept  a  personal  account,  for  he  was  not  in  any 
business.  He  was  going  on  a  journey  which  would  necessitate  his 
absence  for  a  few  weeks.  As  he  turned  away  from  his  wife  he  placed 
in  her  hands  a  pai'cel  of  blank  checks,  which  he  had  signed,  and  told 
her  to  fill  them  up  and  draw  them,  as  her  money  needs  might  demand, 
and  then  he  departed. 

On  his  return  he  was  confronted  by  his  bank  with  a  notice  of  an 
overdraft.  On  conferring  with  his  wife  relative  to  this  matter  she 
naively  explained  to  him  that  the  bank  had  made  a  mistake ;  that  she 
could  not  by  any  possibility  have  overdra^vn  the  account  since  she  had 
not  used  up  all  the  checks  her  husband  had  given  her ! ! 

It  is  a  classical  saying  that  all  very  good  stories  are  lies.  I  think 
this  last  may  not  be  an  exception. 

Here  is  a  story  of  methods  in  banking — the  methods  of  a  man — 
which  is  entirely  true.  It  came  under  my  personal  observation,  and  I 
introduce  it  here  because  it  shows  that  men  as  well  as  women  may 
make  curious  work  of  check-drawing. 

He  was  a  dealer  in  merchandise  in  Boston.  A  party  in  a  town  in 
Maine   owed   him  two  hundred   dollars  for  goods  purchased.     The 


438  PRACTICAIi   BANKING. 

debtor  ad\ised  the  Boston  creditor  that  he  might  draw  on  him  for  the 
amount  through  a  bank  located  near  the  debtor's  home.  Tlie  Boston 
man  sat  down  and  deliberately  drew  a  check  for  8200  on  the  Maine 
bank,  and  signed  to  the  check  the  name  of  the  Maine  man  who  owed 
him  the  two  hundred.  This  ignorantly-forged  cheek  the  Boston  man 
actually  lodged  in  his  bank  in  Boston  for  collection.  Fortunately  for 
him  the  officers  of  his  bank  happened  to  notice  his  blunder  and 
stopped  its  further  progress. 

WHAT   CONSTITUTES   A   SHAREHOLDER   IN    A   BANK. 

In  the  matter  of  qualifying  as  a  Director  in  a  National  bank, 
working  under  an  Act  of  the  United  States  demanding  as  a  property 
quahfication  for  a  Du-ector's  position  a  proprietorship  of  at  least  ten 
shares  of  the  stock  of  the  bank,  it  is  the  best  and  most  regular  way  for 
the  candidate  to  buy  his  ten  shares  for  cash,  have  them  duly  trans- 
ferred to  him  on  the  books  of  the  bank  and  a  certificate  issued  in  the 
usual  form. 

As  it  might  be  desirable  to  prove  proprietorship  i*  some  other 
contingencies  or  circumstances  when  some  of  the  usual  methods  had 
not  been  conformed  to,  it  may  be  important  to  note  what  steps  in  the 
acquisition  may  be  waived.  The  transfer  is  absolutely  essential,  yet 
the  matter  of  taking  out  the  certificate  (the  voucher)  of  the  stock  is 
not  necessary.  Neither  is  it  absolutely  necessary,  in  cases  where  stock 
has  been  subscribed  for  in  a  corporation,  that  it  should  be  paid  for. 
The  bank  has  a  right  to  give  credit  for  the  stock  and  to  make,  as  it 
were,  a  loan  in  this  as  in  any  other  regular  way.  Ruhngs  to  this 
effect  are  on  record  in  cases  under  State  banking  laws.  As  National 
banks  are  not  allowed  by  the  Bank  Act  to  make  advances  upon  their 
own  shares,  this  matter  of  establishing  a  stockholdership  where  a 
stockholder  has  not  paid  his  assessments  would  probably  have  a 
different  aspect  in  a  National  bank. 

BANK    ACCOUNTS   WITH   ADMINISTRATORS. 

Bank  accounts  with  administrators,  executors,  and  other  classes  of 
representatives  of  the  estates  of  deceased  depositors  are  a  common 
feature  of  practical  banking. 

The  old  accounts — the  running  accounts  with  the  person  who  is  dead 
— are  closed  in  the  following  way :  As  soon  as  the  bank  hears  of  the 
decease,  it  ceases  to  pay  outstanding  checks  which  have  been  drawn  by 
the  party  who  is  dead.  The  death  does  not  affect  the  validity  of  the 
checks  as  far  as  the  drawer  is  concerned.  They  are  perfectly  good  as 
a  demand  against  his  estate;  but  the  bank  has  no  right  to  pay  them. 
If  it  does  pay  them,  after  the  death  of  the  drawer,  while  in  ignorance 
of  the  fact  of  the  death — pay  them  innocently — equity,  if  not  law,  will 
undoubtedly  protect  them  from  any  loss  on  account  of  such  action. 

I  ought  to  remark  here  that  there  are  high  authorities  who  take  the 
ground  that  death  does  not  authorize  a  bank  to  refuse  the  payment  of 


EVERYDAY   QUESTI0:NS    AND    OTHER    MATTERS.  439 

a  check  duly  issued  for  a  proper  consideration ;  but  tlie  balance  of  the 
law  and  testimony  is  against  such  an  opinion.  Massachusetts  is  tlie 
only  State  where  payment  of  checks  of  deceased  persons  is  authorized 
by  statute. 

On  the  presentation  to  the  bank,  where  the  balance  of  cash  of  the 
deceased  party  remains,  of  a  proper  certificate  from  a  Probate  office 
that  the  estate  has  been  placed  in  the  hands  of  an  executor  or  adminis- 
trator, that  representative  of  the  estate  can  draw  the  balance,  and 
open,  if  he  pleases,  a  new  account  with  the  bank  in  his  name  as  adminis- 
trator or  executor.  The  bank  takes  the  probate  paper  and  places  it  on 
file,  takes  a  proper  identification  of  the  new  depositor — the  administrator 
— and  takes  also  his  signature  on  the  Paying-Teller's  signature  book. 
The  new  pass-book  to  the  new  depositor  is  then  issued.  If  any  out- 
standing checks  of  the  party  deceased  subsequently  come  into  the  bank 
the  presentors  of  such  are  referred  to  the  administrator,  who  will,  if 
they  are  all  right,  issue  new  checks  in  exchange  for  the  old. 

Bank  managers  should  bear  in  mind  that  it  is  always  necessary  to 
specify,  in  opening  accounts  of  the  class  we  are  describing,  the  names 
of  the  estates  thus  represented,  as  well  as  the  names  of  their  representa- 
tives. 

NEWSPAPER    MONEY    ARTICLES. 

Bankers  everywhere  generally  begin  their  business  day  by  reading 
the  newspapers  or  by  glancing  over  them.  Before  they  commence  the 
day's  work  it  is  positively  necessary  for  them  to  know  how  business, 
political  and  social  affairs  are  drifting  in  the  theatre  of  their  operations. 
And  now  that  steam  and  electricity  have  clasped  the  globe  in  their 
embrace  and  made  it  as  one  solid  and  compact  business  whole,  the  entire 
world  may  be  termed  the  stamping  ground  of  the  broad-minded  banker 
of  the  period.  But  the  banker  in  reading  his  daily  journal  will  linger 
the  longest  over  the  financial  articles — the  monetary  columns.  To 
know  how  to  read  and  study  these  reports  becomes  to  him  a  special 
art ;  and  how  to  properly  discriminate  between  the  wheat  and  the  chaff 
of  many  of  them  demands  sagacity  and  long  experience — for  it  must 
be  confessed  that  the  chaff  predominates  in  too  many  of  the  money 
articles  of  the  daily  paper  of  the  period. 

Many  of  the  leading  daily  journals  of  this  country  and  England 
have  regular  reports  upon  the  money  and  stock  markets  of  the  day 
which  are  marvels  in  the  extent  of  their  sweep,  the  value  of  their 
statistics,  and  the  sagacity  and  depth  of  their  reflections  and  sug- 
gestions. 

I  have  long  been  in  the  habit  of  daily  looking  over  the  monetary 
column  of  the  London  "Times "  and  I  am  inclined  to  place  this  stately 
financial  article  at  the  head  of  its  class.  But  there  are  journals  in 
this  country  which  come  close  to  it  in  pomt  of  ability  in  conducting 
this  feature  of  their  columns. 

The  bane  of  a  money  article  is,  of  course,  any  absence  of  honesty 


440  PRACTICAL   BAXKIXG. 

and  reliability  which  is  the  outcome  of  a  want  of  honesty  and  reliability 
in  its  writer  consequent  upon  bearings  which  are  prompted  by  his 
self-interest  in  the  stocks  and  bonds  which  he  discusses.  This  self- 
interest  may  be  both  direct  and  indirect.  It  is  direct,  Avhen  the  writer 
passes  a  verdict  upon  the  condition  and  prospects  of  securities  in 
which  he,  or  the  clique  to  which  he  belongs,  is  holding  either  long  or 
short  interests.  It  is  an  indirect  interest  which  controls  his  pen,  when 
it  has  been  corrupted  by  the  money  and  influence  of  others  who  have 
a  du'ect  interest  in  the  stocks  and  bonds  about  which  he  is  writing. 

The  position  of  money-writer  on  a  leading  daily  journal  is  one  of 
great  temptation,  and  of  these  press  workers  some  have  gone  down 
before  them.  The  comparatively  small  income  of  the  money-editor, 
from  his  legitimate  occupation,  which  is  that  of  gi^'ing  a  candid  and 
impartial  daily  resume  of  the  money  and  stock  markets,  may  be,  by  the 
contributions  of  corrupting  stock  operators,  swollen  to  princely  propor- 
tions. Or  this  writer  may,  as  we  have  liinted,  be  an  operator  himself, 
and  prostitute  his  column  on  behalf  of  his  own  direct  interests.  His 
victhus  are  those  readers  who  have  the  most  implicit  confidence  in  him, 
and  who  readily  rely  upon  his  opinions  without  a  thought  that  his 
verdicts  are  to  be  received  with  caution  and  suspicion  because  a 
selfish  end  is  to  be  read  between  their  lines. 

THE    AGE    OF    BANK    OFFICERS. 

I  have  known  instances  where  men  ninety  years  of  age  have  been 
bank  Presidents  and  carried  themselves  well  in  the  position  even  at 
that  advanced  age.  I  have  also  known  Book-keepers  in  banks  who  had 
seen  more  than  fifty  years'  uninterrupted  service  at  their  desks.  Not 
long  ago,  an  able  business  man  who  had  just  been  chosen  for  the  first 
time  in  his  life  to  act  as  the  working  President  of  a  large  bank,  and 
who  seemed  as  active  and  young  as  most  men  of  fifty  years  of  age, 
reported  his  age  to  me  as  over  seventy  years.  In  the  Bank  of  England 
clerks  generally  begin  their  terms  of  service  at  the  age  of  eighteen.  At 
sixty,  if  they  have  served  the  old  bank  well,  they  are  entitled  to  a 
pension. 

A  good  story  bearing  upon  this  point  of  age  in  the  matter  of  bank 

service  is  told  of  the  late  distinguished  President  of  the Bank, 

of .     This  man  had  often  held  forth  at  the  meetings  of  his  Board 

in  declaration  of  the  idea  that  no  man  under  any  circumstances — no 
matter  how  apparently  superior  his  qualifications  might  be — was  fit 
to  be  President  of  a  bank  after  he  was  seventy  years  old.  At  such  an 
age,  he  would  say,  a  man  in  a  President's  place  is  sure  to  be  too 
conservative— too  slow — behind  the  times.  These  sentiments  he 
invariably  emphasized  by  announcing  that,  as  for  himself,  he  should 
positively  retire  when  he  reached  the  age  of  seventy,  and  he  wished 
the  Directors  to  be  sure  and  remember  this.  By-and-by  the  prescribed 
time  came,  and  the  Board,  which  had  not  grown  over-fond  of  their 
Chairman,  began  to  look  around  for  another  man  to  take  his  place. 


EVERYDAY   QUESTIONS    AXD    OTHER   MATTERS.  441 

This  movement  soon  came  to  the  ears  of  the  old  President.  He  was 
quite  indignant.  Enterhig  a  meeting  of  his  Board  one  day,  he  passed 
over  to  tliem  in  sliarp  manner  the  keys  of  the  bank  and  liis  immediate 
resignation,  saying  as  he  did  so,  that  they  were  an  ungrateful  set  of  men. 

SETTLING    OP    OLD    SCORES. 

I  have  elsewhere  spoken  of  the  way  long  unbalanced  pass-books 
will  sometimes  come  home  to  be  balanced  at  the  banks  —pass-books 
which  have,  in  some  instances,  been  drifting  about  in  an  unsettled  form 
for  half  a  life  time. 

I  have  here  an  instance  of  a  final  attempt  at  restitution  and  settle- 
ment of  a  long-standing  irregularity  in  banking  which,  in  its  main 
features,  is  more  remarkable  than  anything  of  the  sort  I  have  ever 
observed.  The  names  and  the  bank  I  keep  back  for  fear  of  disturbing 
the  ashes  of  the  departed.  On  the  Directors'  records  of  an  old  and 
excellent  bank  in  a  Northern  state  is  the  following  record : 

AriiiL,  1,  1842.— Voted  that  the  cash  be  made  debtor  to  profit  aud  loss  for  $1,000, 
this  day  received  by  the  Cashier  through  the  postofHce,  enclosed  in  an  envelope, 
without  signature,  and  indicating  that  the  same  is  to  make  good  to  the  bank  a  loss 
occasioned  by  an  error  of  one  of  its  Tellers  many  years  since.  The  following  memo- 
randum was  ordered  to  be  entered  on  the  record,  viz. :  "  The  envelope  named  in  above 
note  contained  the  following  words  '  Jno.  Robinson's  error.'  Robinson  was  formerly 
a  Teller  in  the  bank  and  was  discharged  in  1807,  being  a  defaulter  for  a  large  amount. 
The  balance  remaining  due  to  the  bank,  after  appljing  the  proceeds  of  all  the  property 
surrendered  aud  found  belonging  to  him,  being  between  9,000  and  10,000  dollars,  no 
part  of  which  has  ever  been  paid,  aud  the  principal  long  since  charged  to  the 
Contingent  Fimd." 

No  banker  can  read  this  striking  old  story  without  wisliing  that  there 
were  more  instances  in  which  attempts  have  been  made  to  right  the 
banking  "  errors"  of  the  long  past. 

EQUITY. 

In  practical  banking,  as  well  as  in  general  business,  one  is  continually 
hearing  references  made  to  equity  practice.  I  have  just  heard  a 
banker  say,  when  asked  what  would  be  the  result  in  a  certain  com- 
plication of  business,  that  equity,  if  not  law,  would  give  the  bank  the 
case — would  not  hold  the  bank  liable  in  the  matter  in  question. 

A  brief  word  in  explanation  of  law  and  equity,  or  rather  in  explana- 
tion of  the  difference  between  the  two,  will  be  of  interest  and  value. 
Without  doubt  there  are  many  very  intelligent  practical  bankers  who 
use  this  term  equity  without  clearly  understanding  its  precise  meaning. 

An  equity  court  is  a  tribunal  for  the  correction  of  common  law,  in 
cases  in  which  it  is  deficient,  or  for  the  application  of  the  principles  of 
natural  right  and  common  sense  in  the  work  of  administering  justice. 
Equity  comes  with  its  aid  m  extraordinary  cases — cases  which  are 
exceptions  to  the  general  rule. 

The  reader  must  carefully  observe  that  we  have  confined  the  sweep 
of  equity  to  the  domain  of  common  law.  In  equity  there  can  be  no 
going  counter  to  statute  law — no  correction  of  it,  no  stepping  outside 


442  PRACTICAL  BA:VKI^'G. 

of  it^ — no  matter  how  apparently  exceptional  and  extraordinary  may  bt 
the  cases  under  consideration.  Equity  is,  in  fact  entirely  subservient 
to  statute  law. 

In  plain,  business-like  terms,  what  is  this  common  law  which  may 
be,  in  some  cases,  corrected  and  improved  on  by  equity  ? 

Our  common  law  is  our  unwritten  law,  or  that;  body  of  customs, 
rules  and  maxims  which  have  taken  on  the  binding  power  and  force  of 
law  in  consequence  of  long  usage  and  recognition  by  judicial  decisions, 
and  not  by  reason  of  statutes  now  extant. 

When  an  eminent  lawyer  was  asked  to  give  the  origin  of  common 
law,  he  replied  that  it  was  as  undescribable  as  the  head  of  the  Kile. 

SAVINGS   BANK  MANAGERS. 

There  is  a  point  about  the  general  management  of  the  average 
Sa^^ngs  bank  of  the  period  which  has  for  a  long  time  attracted  the 
attention  of  observing  investors  and  financiers.  The  point  in  question 
is  this:  Savings  banks  are,  in  very  many  cases,  managed — "run  " — by 
a  single  man.  This  one  manager  is  often  the  Treasurer,  or  he  may  be 
the  President,  or  perhaps  a  leading  Director  or  Trustee. 

Institutions  of  the  character  we  are  considering,  which  were 
constituted  for  the  purpose  of  being  the  most  careful  and  conservative 
custodians  of  moneys  belonging  to  the  most  unprotected  classes  of 
investors — poor  people,  uneducated  in  financial  matters,  widows, 
orphans,  etc. — should  be  managed  upon  the  soundest  principles  of 
financial  administration. 

And  experience  has  fully  proved  that  the  method  of  individual 
control,  of  which  we  have  spoken,  is  one  having  in  it  many  elements 
of  danger,  and  one  which  should  therefore  be  carefully  guarded 
against  in  Sa\'ihgs  banks. 

In  these  premises,  that  safety  which  comes  from  the  counsel  of 
many  should  be  diligently  sought  for. 

The  charters  of  these  banks  provide,  in  nearly  all  the  States,  that 
they  shall  be  under  the  management  of  many  Directors  or  Trustees. 
These  ofiicers  should  perform  the  duties  for  which  they  were  chosen— 
should  not  become  mere  men  of  straw,  yielding  all  the  guidance  of 
the  banks  of  which  they  are  supposed  to  be  "Directors"  into  the 
hands  of  one  individual. 

BANK  OFFICERS  AND  AMUSEMENTS. 

Good  Dr.  Wayland  was  once  asked  what  pleasures  he  would  recom- 
mend, and  he  simply  replied,  "Take  a  walk."  The  Doctor  once  said 
another  fine  thing,  which  a  friend  of  mine,  whose  noble  career  has 
rellected  honor  upon  his  old  instructor,  says  has  been  of  more  service  to 
him  than  any  setitence  he  has  ever  heard  or  read.  It  was  this :  ' '  Nothing 
will  stand  against  days'  works."  That  is,  if  you  have  a  great  work  to 
do,  keep  resolutely  at  it,  day  by  day,  and  you  Avill  conquer  it. 

Now  a  word  about  the  aumsement  question.     The  most  reliable, 


EVERYDAY  QUESTIO;«'S  AND  OTHER  MATTERS.  443 

satisfying  and  truly  recreative  amusements  Tsihich  the  world  affords 
are  right  about  us,  accessible  to  all,  and  cost  nothing. 

There  is  in  these  days  a  tendency  greater  than  ever  before,  particu- 
larly among  our  young  people,  towards  making  amusements  an  end 
rather  than  a  means.  Whatever  spare  time  out  of  hours  of  work  and 
sleep  that  comes  to  them,  is  too  often  looked  upon  as  so  much  time  to 
be  spent  simply  in  getting  recreation  of  one  sort  or  another.  With 
this  sole  aim  in  view  dashes  are  made  into  all  sorts  of  what  the  world 
terms  play,  with  a  result,  in  the  end,  that  may  be  compared  to  the 
ashes  that  came  to  the  hands  of  him  Avho  grasped  after  sweet  and 
wholesome  fruit. 

A  great  wi'iter  once  declared,  that  the  dullest  things  in  the  great  city 
in  whieli  he  lived  were  what  that  city  termed  its  popular  amusements, 
and  so  he  gave  them  a  wide  berth,  and  found  enjoyment  in  the  simple, 
incidental  pleasures  which  were  the  natural  outcome  of  his  daily  working 
life. 

Theatres,  ball  rooms  and  cards  may  be  well  enough  in  their  places 
when  taken  in  moderate  doses,  and  the  same  may  be  said  of  the  thousand- 
and-one  ways  in  which  modern  civilization  attempts  to  disport  itself; 
but,  after  all,  a  person  has  got  to  get  his  real  enjoyment  of  life  out  of 
what  may  be  termed  the  every-day,  common-place  pleasures  of  his 
existence.  He  must  be  happy  over  his  work.  The  farmer  must  take 
comfort  in  following  his  plough  and  watching  the  turning  sod,  in 
planting  his  fields  and  gathering  his  crops ;  the  mechanic  in  seeing  the 
products  of  his  skillful  hands  taking  on  a  comely  and  useful  shape,  and 
the  student  in  his  studies.  And  that  mind  is  not  in  a  healthful  condition 
which  cannot  be  best  refreshed  and  ministered  to,  when  weary,  by  a 
simple  walk  under  the  open  sky,  in  the  clear  atmosphere,  and  amid 
nature's  glorious  surroundings. 

SOME  FACTS  AND  FIGURES. 

In  the  New  England  States,  the  National  banks  are  far  more 
numerous  in  proportion  to  the  territory  than  in  any  other  part  of  the 
country.  At  the  South  and  West  they  are  located  at  much  wider 
distances  from  each  other  as  a  general  thing.  And,  in  New  England, 
Savings  banks  are  more  abundant  than  in  other  parts  of  the 
country.  New  York  State  still  has  a  considerable  number  of  State 
banking  institutions,  while,  in  New  England,  the  sway  of  the  National 
banking  law  has  been  well-nigh  complete.  New  York  has  to  day  151 
State  banks,  with  a  capital  of  over  twenty-eight  millions,  according  to 
the  report  of  the  Bank  Superintendent  for  1890. 

There  have  frequently  been  disputes  regarding  the  date  of  the  origin 
of  the  State  banking  system  in  this  country,  and  the  ages  of  some  of 
our  first  estabUshed  banks.  We  place  upon  record  some  facts  in  these 
premises  which  may  be  fully  relied  upon.  The  first  bank  established 
in  the  United  States  was  the  Bank  of  North  America,  of  Pliiladelphia, 
which  was  started  in  1782 ;  the  second,  the  Bank  of  New  York,  June, 


444  PRACTICAL   BANKIXG. 

1784;  the  third,  the  Massachusetts  Bank,  of  Boston,  which  was  started 
one  month  later  in  the  same  year. 

The  charter  of  the  Massachusetts  Bank  was  signed  by  Samuel 
Adams,  President  of  the  Senate,  and  John  Hancock,  "  Gov'r  of  ye 
Commonwealth,"  and  the  first  committee  of  the  subscribers  for  the 
Massachusetts  Bank  stock  were  William  Phillips,  Isaac  Smith. 
Jonathan  Mason,  Thomas  Russell,  Jolm  Lowell  and  Siephen 
Higginson.  This  bank  commenced  business  with  a  capital  of  §300,0011, 
and  at  once  opened  accounts  with  the  Bank  of  North  America,  Phil- 
adelphia, and  Bank  of  New  York,  and  these  accounts  are  continued  to 
the  present  time. 

To-day  the  total  number  of  National  bank  shares  is  6,097,983  and 
the  number  of  shareholders  252,358.  The  great  bulk  of  this  stock  is, 
of  course,  held  in  the  United  States. 

The  Comptroller  of  the  Currency,  in  a  late  report  stated,  however, 
that  6,778  shares  in  United  States  National  banks  were  at  that  date 
held  in  Great  Britain,  8,764  in  France,  4,162  in  Germany,  and  13,735 
in  other  foreign  countries. 

About  half  of  the  capital  of  the  National  banks  is  held  in  the 
Eastern  states. 

To-day,  in  Massachusetts,  bank  shares  are  by  no  means  so  favorite 
an  investment  with  individual  capitalists  as  they  were  a  few  years 
ago.  The  expenses  of  their  management  have  been  only  slightly 
reduced,  and  must  of  necessity  remain  about  as  they  now  are,  the  rate 
of  taxation  of  National  bank  shares,  capital  and  circulation  has  not 
been  reduced,  and  there  are  no  prospects  of  any  early  reduction, 
while  the  current  profits  of  these  institutions  have  decreased,  owing 
to  falling  off  in  interest  rates,  and  general  risks  of  their  business  in- 
creased, owing  to  the  wide-spread  depression  of  trade  and  manufactures. 

But  National  bank  shares  seem  to  be  just  about  as  popular  with  the 
Savings  banks  as  ever,  and  a  large  proportion  of  the  stock  of  Boston 
National  banks  is  to-day  in  the  hands  of  various  savings  institutions. 

More  than  one-half  of  all  the  National  bank  stock  owned  in  the 
New  England  states  is  held  in  Massachusetts. 

The  whole  number  of  National  bank  shareholders  in  the  New 
England  states  is  94,827. 

BANKING   IN    CANADA. 

I  have,  in  my  descriptions  of  the  methods  and  machinery  of  banking 
in  the  United  States,  made  frequent  incidental  alhisions  to  English 
banking  naethods,  many  of  which  came  under  my  personal  observation 
while  traveling  in  Great  Britain. 

There  are  some  peculiar  features  of  Canadian  banking,  which  I 
have  had  an  opportunity  of  looking  into,  and  which  interested  me 
much,  since  they  seem  neither  English  nor  American  in  their  character, 
and  perhaps  come  near  being  a  cross  between  the  two. 

The  Canadian  banks  are  in  the  frequent  habit  of  issuing  demand 


EVERYDAY    QUESTIONS    AND    OTHER    MATTERS.  445 

and  time  certificates  of  deposits,  upon  which  interest  is  allowed.  On 
open — current — accounts  they  are  not  generally  in  the  habit  of  paying 
any  interest. 

The  great  banks  of  Montreal,  etc.,  have  many  branches  in  small 
cities  and  towns.  These  branch  banks  are  under  the  care  of  a  Manager 
or  Agent,  assisted  by  sueli  clerks  as  he  may  need.  The  Manager  of  one 
of  these  branches  must  be  a  banker  of  skill  and  good  judgment,  since 
he  must  take  a  deal  of  action  of  an  important  character  on  his  own 
responsibility.  Sometimes  an  advisory  man  is  appointed  by  the  central 
board  for  the  assistance  of  the  Manager — a  man  of  prominence  and 
ability  located  in  the  place  where  the  branch  exists. 

Canadian  banks  generally  have  solicitors,  and  these,  in  the  case  of 
the  branch  banks,  sometimes  act  as  notaries  and  advisers.  The  salaries 
of  the  branch  Managers  range  from  $2,000  to  !jv4,000. 

The  Manager  of  the  branch  bank  is  relieved  of  some  responsibility 
in  the  matter  of  discounts,  by  a  custom  which  prevails  of  arranging 
at  headquarters  that  certain  lines  of  discount  shall  be  allowed  certain 
specified  dealers  with  the  branches. 

Overdrafts  were,  in  former  times,  often  permitted  in  Canadian 
banks,  but  few  are  now  permitted. 

The  central-chief-banks  have  a  regular  official,  termed  an  Inspector, 
who  travels  around  among  the  branches,  making  frequent  and 
thorough  examinations  of  them — examinations  which  resemble  the 
examinations  made  in  the  States  by  the  National  bank  Examiners. 

Canadian  banks,  branches  and  all,  make  a  regular  practice  of 
dealing  in  sterling  exchange— of  drawing  on  London,  etc. 

The  bank  hours  of  Canada  are  from  10  to  3  o'clock,  except 
Saturday,  when  they  are  from  10  to  1  o'clock, 

Canadian  banks  fee  their  Directors  for  attendance,  paying  them  filO 
or  less  for  being  present  at  Directors'  meetings,  which  are  generally 
weekly. 

The  officers  are  bonded,  as  with  us,  but  the  bonds  are  now  almost 
entirely  guarantee  companies'  bonds,  the  individual  bond  being  well- 
nigh  an  obsolete  thing  in  the  Dominion. 

In  England  banks  make  a  charge  for  keeping  small  accounts.  Such 
was  once  the  custom  with  some  banks  in  New  England.  There  is  no 
such  custom  in  Canada. 

Circulating  notes  of  the  central  banks  are  issued  by,the  branches, 
after  being  countersigned  by  the  branches. 

Many  of  the  Canadian  banks  make  their  discount  customers  notify 
all  the  notes  held  for  them  by  the  bank,  furnishing  them  blanks  for 
that  purpose. 


446  PRACTICAL    BA^'KI^'G. 


CHAPTER  XXA^II. 

INSIDE    WORKINGS    OF    A    BANK. 

The  following  papers  were  written  by  a  well-known  bank  officer  for  publication 
in  Ehodes'  Journal  of  Banking,  and  being  in  line  with  Mr.  Patten's  work  and 
supplemental  thereto,  the  articles  have  been  revised  for  this  volume. 

BANK    EXAMINATIONS. 

Question:  "  Wliat  is  the  best  method  for  a  bank  officer  to  pursue 
in  examining  liis  own  institution  ?" 

Answer  :  Bank  examinations  can  be  made  in  various  ways  and  under 
different  circumstances.  In  National  banks  there  are  generally  one  or 
two  examinations  each  year  by  the  United  States  Bank  Examiner  who 
examines  the  institutions  to  the  best  of  his  ability  and  according  to 
rules  laid  down  by  the  Comptroller  of  the  Currency  to  whom  his 
reports  are  made.  These  reports  are  seldom  if  ever  seen  by  bank 
officers,  and  unless  the  Examiner  chooses  to  inform  them  that  every- 
thing is  right  they  are  none  the  wiser.  In  State  banks  examinations 
are  made  by  State  Bank  Examiners  under  State  laws,  but  these  reports 
are  filed  with  the  Banking  Department  of  each  State,  and  of  course  the 
officers  of  banks  do  not  have  access  to  them. 

There  seems  to  be  a  misconception  in  the  mind  of  the  public 
regarding  the  duties  of  National  and  State  Bank  Examiners,  and  when 
a  bank  fails  many  people  blame  them  for  not  doing  their  duty.  It 
should  be  clearly  understood  that  bank  examiners  are  not  detectives. 
They  cannot  go  over  all  the  transactions  of  a  bank  for  a  length  of 
time,  and  if  a  defalcation  can  be  concealed  from  the  officers  or 
Directors  for  a  series  of  years  it  can  hardly  be  expected  th^t  a  bank 
Examiner,  in  the  course  of  an  examination  made  once  or  twice  a  year, 
will  unearth  it.  It  is  true  that  it  is  their  business  to  look  after  such 
things,  still  they  cannot  be  expected  to  do  impossibilities. 

The  officers  and  Directors  of  a  bank  are  responsible  if  anything  goes 
wrong,  and  the  blame  must  rest  upon  them. 

Banks  are  examined  about  dividend  time  by  a  committee  from  the 
Board  of  Directors.  The  committee  goes  over  everything  in  a  perfunc- 
tory sort  of  a  way,  glances  hurriedly  through  the  bills  discounted, 
counts  the  Tellers'  cash  as  best  it  knows  how  and  perhaps  runs  up  a 
few  columns  of  figures,  which  really  means  it  has  examined  the  bank's 
liability  to  the  stockholders,  but  nothing  has  been  done  in  the  way  of 
examining  its  liability  to  the  public,  and  I  venture  to  say  the  committee 
never  thinks  of   examining  the    collection   department,    the   special 


INSIDE    WORKINGS    OF    A    BANK.  447 

deposits  left  for  safe  keeping,  or  anything  of  the  kind.  I  heard  of  a 
Teller  who  for  a  joke  once  held  aside  one  hundred  thousand  dollars  of 
his  cash  during  an  examination  by  the  Directors  and  it  was  never 
discovered. 

These  examinations  in  the  nature  of  things  must  be  defective,  as 
the  Directors  are  generally  active  business  men  and  understand  the 
granting  of  credits,  but  Avhen  it  comes  to  the  details  of  a  careful  bank 
examination  it  is  entirely  out  of  their  line. 

In  some  banks  it  is  the  practice  to  hire  experts  from  other  institu- 
tions to  make  an  examination.  This  is  excellent  in  its  way  but  banks 
have  different  methods  of  conducting  business.  There  are  many  things 
that  are  difficult  for  outsiders  to  comprehend  and  they  are  not  always 
able  to  scrutinize  the  loopholes  for  defalcations,  to  say  nothing  of 
giving  away  the  secrets  of  your  business.  This  plan  is  an  excellent  one 
if  it  can  be  carried  out,  but  there  is  perhaps  only  one  bank  in  five 
hundred  where  it  can  be  done  to  advantage. 

None  of  these  examinations  are  what  is  really  wanted  by  the  bank 
officer.  He  sits  at  his  desk  all  day,  his  clerks  are  meeting  customers, 
paying  cheeks,  receiving  deposits,  discounting  notes,  giving  out  balances, 
and  the  business  of  the  bank  is  being  conducted  in  all  its  departments. 
For  all  that  he  knows  there  may  be  a  defaulter  working  right  under 
Ms  eye,  or  a  man  may  be  making  a  false  entry  that  very  instant. 

A  good  bank  officer  wishes  many  times  that  he  could  stop  the  wheels 
for  a  day,  have  every  page  opened  and  proved  and  know  that  his  bank 
is  all  right.  He  thinks  he  understands  and  is  familiar  with  the  workings 
of  his  clerks,  their  habits,  etc.,  or  if  he  is  not  he  ought  to  be;  and  yet 
there  is  always  a  desire  in  his  mind  for  more  light.  Many  offl.cers  have 
Bot  been  brought  up  in  the  business  and  do  not  themselves  know  all 
the  details  of  running  a  bank,  and  as  they  dwell  on  these  things  a 
feeling  of  helplessness  comes  over  them,  and  they  ask,  "How  can  I  best 
examine  my  bank  ? " 

There  is  no  rule  for  examinations  that  will  make  men  honest,  but 
bank  officers  should  strive  by  all  the  means  in  their  power  to  throw 
such  safeguards  around  employees  that  they  will  be  better  able  to  resist 
the  temptation  to  do  a  wrong  act. 

The  first  requisite  of  a  careful  bank  examination  is  that  the  party 
to  be  examined  should  not  be  informed  beforehand.  If  the  least  chance 
be  given  for  a  man  to  prepare  for  an  examination  he  can  generally  do 
so  in  such  a  way  that  the  best  of  systems  will  be  defeated.  If  the 
Directors  purpose  sending  experts  to  examine  a  bank  the  officers  should 
know  nothing  whetever  about  it  until  the  Examiners  put  in  an  appear- 
ance with  their  authority.  In  the  system  I  am  about  to  outline,  under 
no  circumstances  should  the  desk  to  be  examined  be  notified  five 
minutes  before  the  Examiners  are  ready  to  go  over  the  department. 
This  must  be  laid  down  as  an  invariable  rule. 

The  only  true  way  for  an  officer  to  examine  his  bank,  it  seems  to 


448  PRACTICAIi    BANKING. 

me,  is  by  employing  his  own  clerks  to  make  the  examination.  This 
can  readily  be  done  in  nearly  every  bank,  and  it  has  been  tried  with 
great  success  in  banks  of  different  sizes.  The  officers  should  expect  to 
pay  for  an  examination,  and  in  this  way  they  will  secure  the  best  efforts 
of  the  parties  doing  the  work  and  at  the  same  time  enable  their  clerks 
to  earn  a  little  extra  money,  which  is  always  acceptable. 

The  officers  can  generally  select  a  committee  from  among  the  clerks 
not  employed  in  the  departments  to  be  examined,  and  it  can  vary  in 
number  according  to  the  size  of  the  bank.  Select  one  of  the  best  men 
as  Chairman;  pay  him  twice  the  amount  paid  each  of  the  other 
members,  and  throw  the  burden  of  the  'responsibility  upon  him  to  see 
that  the  examination  is  properly  conducted.  Make  all  of  your  arrange- 
ments beforehand  very  carefully,  and  mform  the  members  of  the 
committee  in  time  for  them  to  get  their  work  in  proper  shape. 

We  will  now  suppose  that  such  a  committee  is  to  make  an  examina- 
tion. The  Chairman  should  be  provided  with  written  authority  from 
one  of  the  officers,  as  follows : 

To  all:  Messrs.  Drake,  Mennie,  Halloek,  Waterman  and  Ken^iedy  are  hereby  aiipointed 
a  Committee  of  Examination,  with  authority  to  examitie  this  bank,  at  the  close  of  busi7iess, 
on  December  20,  1890,  and  Mr.  D.  B.  Hallock  is  hereby  aiij)ointed  Chairma?i  of  said 
Committee,  with  full  aidhority  to  carry  out  all  necessary  details  of  such  examination. 

{Signed)  William  Goodc,  Cashier. 

The  Chairman,  at  the  stroke  of  three,  steps  into  the  Paying-Teller's 
department  with  as  many  assistants  as  necessary,  and  proceeds  to 
count  the  cash ;  one  assistant  going  to  the  Receiving-Teller's  depart- 
ment, one  to  the  Third  Teller's  department,  one  to  the  Discount 
Department,  and  the  others  to  the  Book-keepers'  departments.  The 
general  Book-keeper  should  be  instructed  to  take  off  a  proof  of  the 
general  ledger  at  close  of  business  of  that  day  and  hand  it  to  the  Chair- 
man. Supposing  that  the  old  style  of  ledger  be  used,  the  Examiners 
should  take  charge  of  the  same,  not  allowing  the  Book-keepers  to 
touch  them  until  every  balance  has  been  struck  and  carefully  taken 
off.  The  postings  should  be  gotten  up  for  that  day's  woi-k,  and  as 
many  balances  as  possible  should  be  taken  off  that  evenmg,  working 
as  far  into  the  night  as  is  necessary.  The  ledgers  should  then  either 
be  put  in  a  safe,  where  the  Book-keepers  cannot  have  access  to  them, 
or  put  under  seal,  and  the  Examiners  shoidd  come  to  the  bank  the 
following  morning  at  an  early  hour,  and  take  off  the  rest  of  the 
balances,  so  as  not  to  interfere  with  the  day's  business.  They  can  at 
their  leisure,  during  the  next  few  days,  find  the  differences,  making  a 
careful  note  against  each  account  of  what  the  difference  consists,  which 
they  will  include  in  their  signed  report  to  the  officer. 

The  Chairman  should  be  furnished  with  the  following  instructions 
for  examination  of  the  different  departments : 

PAYING-TELLER. 

1st.  Count  all  cash  and  see  that  it  agrees  with  the  amounts  called 
for  by  the  Paying-Teller's  proof. 


IXSIDK    WOUKINGS    OP    A    BAXK.  449 

2(1.  Carel'ully  list  all  cheeks  that  have  been  paid  by  the  Paying- 
Teller  that  day,  and  see  that  the  total  equals  the  amount  cal'ed  for  by 
his  books. 

3d.  Scrutinize  all  charges  made  by  him  to  the  other  Tellers,  all  cash 
items,  so-called,  receipts  for  currency  shipped,  Clearing-llouse  trans- 
actions, and  any  entry  from  his  desk  that  is  out  of  the  usual  course  of 
business. 

4th.  See  what  tickets,  if  any,  are  held  in  his  cash,  and  make 
careful  report  of  such. 

5th.  See  that  the  total  amount  of  cash  on  hand,  with  the  amount 
of  checks  paid  by  him  during  the  day  and  the  amounts  charged  to  the 
other  Tellers  or  different  departments  of  the  bank,  equals  the  total 
amount  of  his  cash  at  the  close  of  business  on  the  previous  day. 
receiving-teller's  department. 

1st.  Count  all  cash  and  see  that  it  agrees  with  the  amount  called 
for  by  Receiving-Teller's  proof. 

2d.  Look  back  and  list  all  checks  drawn  on  other  banks  received  on 
deposit  during  the  day,  and  if  a  Clearing-House  bank,  look  back  all 
checks  mtended  for  the  Clearing-House  and  see  that  they  are  properly 
listed  and  the  amounts  correctly  transferred  to  the  Clearing-House 
sheet. 

3d.  Examine  carefully  items  called  city  and  foreign  office  and  see 
that  nothing  is  bemg  held  which  is  not  collectible  the  next  day  or  which 
is  not  in  shape  to  be  charged  to  the  difierent  correspondents  of  the 
bank. 

4th.  List  all  checks  on  your  bank  received  on  deposit  during  the 
day  and  see  that  they,  together  with  the  checks  on  other  banks,  city 
and  foreign  office,  and  cash  equal  the  total  amount  of  deposits  received, 
which  should  also  be  carefully  listed  and  tickets  footed. 

In  looking  back  checks  drawn  on  other  banks,  great  care  should  be 
exercised  to  see  that  none  are  fictitious  and  that  all  are  properly 
accounted  for  as  coming  through  some  department  of  the  bank. 

THIRD  teller's  DEPARTMENT. 

1st.  Count  the  cash. 

2d.  Carefully  check  all  charges  made  to  out-of-town  correspond- 
ents from  the  foreign  office  of  the  iDrevious  day,  proving  same. 

3d.  Carefully  check  city  office  of  the  previous  day  and  see  that  every- 
thing has  been  collected  which  is  called  for  by  the  proof  of  that  day. 

4th.  CarefuDy  call  back  all  mail  received  on  day  of  examination 
and  see  that  proper  entries  have  been  made  for  same,  and  if  a  Clearing- 
House  bank  carefully  prove  the  additions  to  the  Clearing-House  sheet. 

oth.  Scrutinize  all  items  appearhig  on  his  books  as  coming  from 
any  department  in  the  bank  and  check  back  to  their  source. 

6th.  See  that  nothing  has  been  charged  to  him  by  the  other  Tellers 
or  charged  by  him  to  them  which  has  not  been  properly  entered. 

Great  care  should  be  used  to  see  that  all  checks  handled  by  hun 


450  PRACTICAIi    BAXKI>'G. 

are  bonajide,  and  that  there  are  no  checks  in  his  department  taken 
from  mail  that  have  not  been  credited. 

Examine  all  notes  left  for  collection,  past-due  items  of  all  descrip- 
tions, and  anything  on  the  desk  of  irregular  order. 

DISCOUNT  DEPAKTMENT. 

1st.  List  bills  discounted  or  compare  with  discount  tickler  and  prove 
same  with  general  ledger. 

2d.  Any  bills  discounted  that  are  away  for  acceptance,  collection, 
etc. ,  must  be  proved  by  letter,  care  to  be  used  to  see  that  all  have  been 
actually  sent  as  some  may  have  been  ordered  back,  prepaid,  etc. 

3d.  Report  all  collateral  loans  not  covered  by  required  margin. 

4th.  Report  all  past-due  paper. 

5th.  If  special  deposits  are  held  on  discount  desk  carefully  compare 
same  with  list  and  see  that  proper  receipts  have  been  taken  for  any 
delivered. 

6th.  Carefully  list  and  report  any  securities  which  are  not  held  as 
special  deposits  or  collateral  to  loans. 

7th.  Report  any  and  all  collateral  that  you  are  unable  to  find 
quotations  for. 

8tli.  Select  certain  calculations  made  by  the  Discount  Clerk  during 
a  period  of  three  mouths  before  the  examination  and  see  if  correct. 

GENERAL.  BOOK-KEEPER. 

1st.  Proof  shall  be  taken  of  general  ledger. 

2d.  Count  and  prove  all  bonds,  stocks  and  mortgages  on  hand  called 
for  by  the  ledger.     If  any  be  away  verify  by  correspondence. 

3d.  Examine  United  States  Treasurer's  dupHcate  receipt  of  bonds  to 
secure  circulation  and  United  States  deposits. 

4th.  Write  reserve  agent  and  all  correspondents  to  advise  the  chief 
examiner  at  his  address  the  balance  due  the  bank  at  close  of  business 
on  date  of  examination.  Upon  receipt  of  same  careful  reconcilement 
should  be  made. 

5th.  Examine  current  expenses,  taxes  paid  and  premium  account 
and  see  that  no  irregular  entries  have  been  made. 

6th.  The  account  with  the  Treasurer  of  the  United  States  to  be 
proved  by  his  letters  of  advice. 

7th.  Scrutinize  the  various  earnings  accounts  and  see  that  there  are 
no  improt)er  entries. 

8tli.  Prove  the  circulation  received  from  Washington. 

9th.  Carefully  prove  the  individual  deposits,  which  can  be  verified 
from  the  other  Examiners'  report. 

10th.  Certificates  of  deposit  should  be  proved  from  the  Certificate- 
book  and  register. 

11th.  Carefully  verify  certified  aceouut, 

12th.  List  and  prove  Cashier's  checks  outstanding. 

I  have  tried  to  make  these  instructions  cover  as  fully  as  possible  the 
business  of  suiall  banks  as  well  as  laryre  ones. 


I^'SIDK    WORKINGS    OF    A    BANK. 


451 


It  must  be  remembered,  as  stated  at  the  outset,  that  this  examination 
is  from  an  officer's  point  of  view,  and  if  your  force  of  clerks  outside  of 
tlie  departments  to  be  examined  is  not  large  enough  to  make  a  whole- 
sale examination,  you  can  readily  take  up  one  department  at  a  time 
wliieh  will  answer  every  purpose. 

The  system  may  not  be  perfect,  but  it  serves  the  excellent  purpose 
of  acquainting  clerks  with  departments  other  than  their  own,  and  gives 
them  an  experience  that  will  be  of  great  value  to  them  as  well  as  to  the 
bank,  and  if  well  paid  they  will  not  be  loth  to  do  the  work. 

Many  points  have  probably  been  omitted  from  the  instructions  that 
should  be  covered,  as  the  writer's  purpose  is  to  open  up  the  subject  of 
Bank  Examinations  from  an  officer's  point  of  view. 

Following  will  be  found  one  or  two  specimen  reports,  as  handed  in 
by  the  Examiners.  Reports  upon  other  departments  can  be  made  in 
something  of  the  same  style,  but  it  is  hardly  worth  while  to  burden 
the  reader  with  too  many  of  them. 

KEPORT   ox   book-keepers'   DEPARTMENT. 

William  Goode,  Esq.,  Cashier. 
Bear  Sir : 

Tliis  is  to  certify  that  I  have  made  a  list  of  balances  of  accounts  in  the  individual 
ledgers  at  close  ofhiisiness  December,  20, 1S90,  and  as  a  result  have  discovered  discrepancies 
in  133  accounts  caused  by  errors  as  follows: 
79  errors  wi  striking  balances. 
§4  errors  in  posting. 

19  errors  in  writitig  in  deposit-tickets  and  checks. 

TJicse  having  bee7i  rectified  the  overdrafts  were  proved,  and  the  total  of  deposits  was 
foiDid  to  agree  with  the  amount  called  for  by  the  general  ledger  on  above  date,  viz., 

^ Hespectfully  submitted,        Clifford  Waterman,  Examiner. 

REPORT   ON   tellers'   DEPARTMENT. 
William  Goodc,  Esq.,  Cashier. 
Dear  Sir : 

In  pursua7ice  of  instriictions  received  from  you,  we  have  carefully  counted  the 
cash  and  examined  all  items  carried  as  cash  by  the  Tellers  at  the  close  of  business  on  tJie  20th 
inst.,  and  siibmit  the  following  reiMrt: 

FIRST  TELLER'S  DEPARTMENT. 


Cotmter  Checks $17,111  70 

Items  charged  to  Third 

Teller 3,956  52 

Clearing-House  debit  this 

day 67, lU  23 

Cash  on  hand 1.039,909  47 


$1,128,121  9S 


Cash  at  close  of  business 

yesterday. $1,065,305  25 

Received    from    iseeond 

Teller 32,675  17 

Received     from      Third 

Teller 4,1U  20 

Received  from  Treasurer 

United  States 26,000  00 

Second  Teller  short 36 

$1,128,121  98 


First  Teller  carries  as  casJi  memorandum  tickets  as  follows: 

Deposited  in  Safe  Deposit  Company  vault,  silver $S,730  00 

[This  was  verified  by  visiting  vaitlt  and  counting  -money.] 
Special  deposit  of  United  States  gold  certificates  with  reserve  agent 150,000  00 

[Accompanied  by  letter  from  said  bank  which  has  been  verified  by  ?<s.] 
Pi  tty  disbursements 5  IS 


453 


PRACTICAL    BAXKIXG. 


Second  teller's  departmext. 


Checks  on  this  hank $7,512  85 

Charged  Third  Idler 13  25 

Exchanges 105,006  47 

City  office 3,898  49 

Foreign  office 6,901  5S 

Cash 18,948  19 

Short ._; 55 

$142,L'S1  21 


Deposits  this  day $108,545  09 

Received  from  Third  Teller    33,736  12 


$142,281  21 


THIRD  TELLER'S  DEPARTMENT. 


Cash $804  33 

Exchanges  for 26.306  71 

City  office 1,132  97 

Foreign  office 813  65 

Cash  items 1.550  00 

$30,607  66 


/Sundry  credits $30,607  66 


$30,607  66 


We  have  alio  e.vamined  all  collections  connected  tcith  the  desk  including  notes, 
dividends,  coupons  and  unpaid  coupons  that  are  past  due,  and  found  them  to 
agree  with  the  hooks  of  the  hank. 

RECAPITULA  TION. 


Cash   First  Teller 

$1,039,909  47 

18,948  19 

804  33 

Cash   Second  Teller 

Cash  Third  Teller 

$1,059,661  99 

105,006  47 
26.306  71 

t^econd  Teller    

Third  Teller 

131,313  18 

City  office  : 

Second  Teller 

3,898  49 
1.132  97 

Third  Teller 

5,031  46 

Foreign  office : 

Second  Teller 

6,901  58 
813  G5 

Third  Teller 

715  23 

Cash  items 

1,550  00 

Total  cash  

$1,205,271  86 
38 

Deficiency 

Cash  as  per  general  ledger 

$1,205,272  24 

Tours  respectfully, 

Daniel  B.  Hallock,  Chairman. 

Drake,  Rennie,  Waterman  and  Kennedy 


} 


Committee. 


TELLERS'    DIFFERENCES. 

Question:  "What  is  the  best  method  of  keepmg  an  accurate  and 
satisfactory  record  of  Tellers'  differences  ?" 

AxswKR:  Tlieoretically,  there  should  be  no  differences.  All  entries 
on  the  books  of  a  bank  should  be  correct,  every  credit  should  be 
represented  by  the  same  amount  of  debit,  and  the  Tellers  should 
always  pay  and  receive  the  proper  amount  of  money ;  but  while  this  is 
true  in  theory,  practically  it  is  never  done,  and  there  is  not  a  bank  that 
does  not  have  luore  or  less  differences. 

All  differences  should  be  iiinuodiately  reported  to  the  officers.  No 
Teller,  having  a  difference  in  his  cash,  should  be  allowed  to  close  up 
for  the  night  until  every  known  method  of  finding  the  error  has  been 


INSIDE   WORKINGS   OF   A   BANK.  453 

exhausted.  No  Book-keeper  or  clerk  on  any  desk  where  differences 
oceur  should  k^t  them  run  for  any  length  of  time  without  making  every 
effort  to  And  them. 

It  is  not  the  purpose  of  the  writer  to  give  a  set  of  rules  for  finding 
differences — that  must  be  left  to  the  individual  bank, officer;  but  many 
differences  occur  which  are  never  found,  and  some  method  should  be 
used  to  keep  an  accurate  and  satisfactory  record  of  them. 

In  many  banks  the  officers  look  after  small  leaks  and  keep  the  strings 
tied  in  a  hard  knot ;  in  others,  things  are  allowed  to  go  at  loose  ends 
without  a  thought  of  the  consequences,  one  of  the  loose  ends  being 
"Tellers'  differences." 

In  some  banks  the  Teller  holds  aside  all  "ovei-s,'"  and  takes  from 
the  amount  any  "shorts,"  no  record  of  them  being  kept.  When  the 
"shorts"  exceed  the  "overs,"  a  ticket  is  generally  carried  in  his  cash. 
This  system  cannot  be  condemned  too  strongly,  as  it  places  temptation 
in  the  way  of  a  Teller  to  use  money  which  does  not  show  in  his  cash, 
and  if  his  expenses  are  heavier  than  usual  or  his  family  ill,  he  may 
borrow  and  "  forget  "  to  return  the  money,  which  opens  the  way  for  a 
man  who  is  not  dishonest  to  use  money  belonging  to  others,  and  thus 
begins  a  downward  course. 

.  Dishonesty  among  bank  clerks  is  the  exception  and  not  the  rule, 
but  officers  should  be  on  the  alert  to  keep  temptation  as  far  away  from 
them  as  possible. 

If  we  investigate  the  defalcations  that  have  occurred  during  the  last 
ten  years,  we  will  hardly  find  a  thief  who,  at  first,  deliberately  stole  a 
large  amount  of  money.  He  probably  began  by  taking  a  small  sum, 
quieting  his  conscience  by  saying  it  was  only  a  temporary  loan,  which 
he  would  pay  soon ;  but  it  turned  out  to  be  the  old  story — he  could  not 
repay  the  amount,  went  from  bad  to  worse,  and  finally  stole  all  that  he 
could  lay  his  hands  on. 

Other  banks  keep  a  ledger  account  called  "Difference  Account,"  to 
which  they  charge  and  credit  all  differences.  At  the  end  of  the  year 
they  can  generally  tell  whether  the  ' '  ovex-s  "  exceed  the  ' '  shorts, "  but  I 
doubt  very  much  whether  they  can  tell  which  desk  has  had  the  most 
differences  or  given  any  proper  statistics  relating  to  the  same.  This 
method  is  better  than  the  previous  one,  but  does  not  answer  the  question. 

Two  ordinary  ledger  sheets  should  be  ruled  in  the  manner  shown 
on  the  following  pages,  454  and  455  (see  Forms  91  and  92). 

In  the  system  illustrated  on  pages  454  and  455  an  accurate  record  is 
made  of  every  difference,  no  matter  how  small,  and  the  officers  are 
thus  enabled  to  trace  and  know  when  and  on  what  desk  they  occurred. 

An  account  should  be  opened  in  the  Individual  Ledger  called  "Overs 
and  Shorts,"  to  which  every  shortage  should  be  charged  and  every 
"over"  credited.  Charges  and  credits  to  this  account  should  state 
clearly  the  date  of  difference,  on  what  desk  it  occurred,  and  any  other 
necessary  particulars.     When  correcting  the  whole  or  part  of  a  differ- 


454 


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IXSIDE    WORKINGS    OF    A    BANK. 


456 


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Form  92 


456  PRACTICAL    BAXKIXG. 

ence,  the  date  and  particulars  of  the  original  error  should  be  clearly 
stated. 

One  page  is  for  the  "shorts^,"  the  other  for  the  "overs."  In  many 
respects  the  two  correspond,  there  being  in  each  a  column  for  "date," 
"date  of  difference."  "date  of  correction,"  "first  Teller,"  "second 
Teller,"  "third  Teller,"  and  "exchanges."  On  the  "shorts"  page 
there  are  also  columns  marked  "debit  balance,"  "credit,"  and  "date 
of  short,"  which  correspond  respectively  to  "  credit  balance,"  "  debit," 
and  " date  of  over"  on  the  "overs"  page. 

These  columns  are  used  as  follows :  The  ones  marked  ' '  date  "  are 
for  date  of  entry;  "date  of  difference,"  when  the  difference  occurred; 
"date  of  correction,"  subsequent  date  when  the  difference  (or  any  part 
of  it)  was  found;  "fu*.st  Teller,"  "second  Teller,"  "third  Teller,"  and 
"exchanges,"  are  used  for  entering  differences  occurring  on  these 
desks. 

On  the  "shorts"  page  "debit  balance"  shows  total  amount  of 
"shorts,"  to  which  is  added  every  "short"  posted  in  any  of  the  four 
columns,  "first  Teller,"  "second  Teller,"  "third  Teller,"  and  "ex- 
changes." The  column  "  credit "  is  for  the  purpose  of  crediting  when 
found,  any  previous  difference  (or  part)  by  deducting  same  from 
amount  of  "debit  balance."  "Date  of  short"  is  used  in  connection 
with  "  credit"  column  and  refers  to  date  of  old  "  short." 

By  referring  to  the  diagram  (see  Form  92)  it  appears  that  on 
October  2d  the  second  Teller  was  short  $2.  This  difference  Avas  found 
October  10th,  and  the  amount  is  noted  in  "credit"  column  and 
deducted  from  previous  "debit  balance,"  the  date  of  "  short  "  October 
2d  being  opposite.  Also  avUI  be  noticed,  opposite  the  date  October  2d 
in  "  date  of  correction,"  the  date  when  the  difference  was  found. 

On  the  "overs"  page  "credit  balance"  shows  total  amount  of 
"overs, "to  which  is  added  every  "over"  posted  in  any  of  the  four 
columns,  "first  Teller,!'  "second  Teller,"  "third  Teller^,"  and  "ex- 
changes." The  column  "debit"  is  for  the  purpose  of  debiting  when 
found,  any  previous  difference  (or  part)  by  deducting  same  from 
"  credit  balance."  "  Date  of  over  "  is  used  in  connection  with  "  debit  " 
column  and  refers  to  the  date  of  old  "  over." 

It  will  be  seen  that  on  October  4th  the  first  Teller  was  over  82  (see 
Form  91).  This  "over"  was  found  October  15th,  and  the  amount  is 
noted  in  ' '  debit "  column  and  deducted  from  previous  ' '  credit  balance, " 
the  date  of  ' '  over  "  being  noted  before  it.  Also  will  be  noticed  opposite 
the  date  October  4th,  in  "  date  of  correction,"  the  date  when  the  over 
was  found. 

The  difference  between  the  total  of  "debit  balance  "  and  "  credit 
balance"  is  the  amount  of  present  "short"  or  "over,"  which,  as' 
noticed  in  the  diagrams,  is  $7.33  "  short "  (see  pages  454  and  455). 

If  this  system  is  faithfully  carried  out,  at  the  close  of  each  year  a 
careful  memorandum  can  be  made  of  all  differences  that  have  occurred, 


INSIDE    WORKINGS    OF    A    BANK. 


457 


showing  whether  there  is  an  excess  of  "  overs  "  or  "sliorts,"  as  in  the 
following: 


Excess  of 
Shorts. 

Excess  of 

OVEKS. 

Overs 

$138  00 
122  27 

2  15 
1  01 

First  Teller 

Shorts 

Overs 

G9  OS 
45  74 

Second  Teller 

Shorts 

23  34 

Overs 

8  97 
11  12 

Third  Teller 

Shorts 



Overs 

12  93 

13  94 

Exchanges 

Shorts 

$3  16' 

$39  07 

NUMBER   OP   ERRORS. 


First  Teller. 


Second  Teller. 


Third  Teller.. 
Fourth  Teller. 


14 
5 

19 

19 

35 

54 

4 

6 

10 

26 

33 

59 

142 


This  system  can  be  altered  or  amended  to  suit  the  needs  of  different 
banks ;  if  followed  out  it  goes  far  toward  solving  a  difficult  problem. 

•  DEPOSITORS'   ACCOUNTS. 

Qtestion  :  ' '  What  is  the  best  method  of  keeping  them  ? " 

Answer  :  It  is  not  the  purpose  of  the  writer  to  propose  an  infallible 
system  for  keeping  depositors'  accounts  but  to  discuss  the  general 
principles  that  underlie  all  good  systems. 

The  same  general  laws  govern  the  conduct  of  banks  with  depositors 
all  over  the  country,  but  the  management  varies  according  to  location, 
and  an  officer  in  selecting  a  method  for  keeping  accounts  of  depositors 
must  be  guided  largely  by  the  situation  of  his  bank  and  the  class  of 
business  it  expects  to  do. 

A  bank  in  a  country  town  with  few  depositors  would  not  require 
the  system  used  by  a  bank  in  a  small  city,  and  a  bank  in  the  latter 
would  hardly  expect  to  use  the  elaborate  system  necessary  in  a  large 
financial  centre. 

A  bank  Avhose  accounts  consist  chiefly  of  other  banks  must  devise  a 
svstem  verv  different  from  that  of  a  bank  having  no  accounts  of  that 


4o8  PRACTICAL   BANKIjN'G. 

nature.  A  bank  whose  dealers  are  mostly  mercantile  people  who  draw 
a  moderate  amount  of  cheeks,  need  not  have  so  elaborate  a  system  as  a 
bank  having  private  and  ladies'  accounts  on  wliich  large  numbers  of 
checks  are  drawn  and  information  is  being  constantly  required.  A 
bank  in  Chicago  or  San  Francisco  will  find  it  difficult  to  use  the  system 
pursued  by  a  New  York  bank,  even  if  the  depositors  are  of  the  same 
class ;  therefore  it  follows  that  each  officer  must  study  the  best  system 
and  select  the  one  most  adapted  to  his  business. 

There  are  three  general  principles  which  can  be  laid  down  in 
selecting  a  proper  method  for  keeping  depositors'  accounts: 

1st. — The  system  must  be  absolutely  correct  and  one  which  will 
facihtate  the  proving  of  the  accounts  by  the  clerks.  Officers  often 
forget  that  the  only  way  many  customers  come  in  contact  with  their 
institution  is  through  the  medium  of  their  accounts,  and  there  is 
nothing  so  annoying  to  a  customer  as  to  have  his  account  kept  in  a 
loose  manner  and  to  have  errors  constantly  occurring.  More  accounts 
are  probably  lost  to  banks  through  errors  in  the  deposit  ledgers  than 
in  other  ways,  and  any  institution  which  has  a  poor  method  of  keeping 
these  accounts  does  not  stand  much  chance  of  success.  It  makes  very 
little  difference  to  the  depositor  how  inaccurately  other  books  of  the 
bank  are  kept  or  whether  the  handwriting  is  legible;  he  judges  its 
business  metliods  largely  by  the  way  his  pass-book  is  balanced  and  his 
account  handled. 

2d. — The  system  should  be  one  in  which  every  known  method  is 
used  for  the  protection  of  the  bank  against  defalcation  or  collusion  by 
a  clerk  with  an  outsider.  Here  is  a  point  where  the  best  of  systems 
will  fail  if  not  carefully  watched,  and  one  way  to  prevent  anything  of 
the  kind  is  to  change  the  book-keepers  from  time  to  time  and  pursue 
the  system  of  bank  examinations  mentioned  on  another  page. 

3d. — The  best  system  should  show  in  some  way  a  complete  history 
of  each  depositor's  account.  George  Rae,  in  the  "  County  Banker," 
says:  "A  man's  bank  account  will  not  necessarily  disclose  what  he  is 
worth,  but  its  entries  will  serve  as  tracks  to  indicate  with  some  degree 
of  clearness  the  line  of  progress  along  which  he  is  moving  towards  either 
failure  or  success.  Your  customers  are  unconscious  diarists  of  a  portion 
of  their  lives.  Every  account  in  your  books  is  a  record  more  or  less 
graphic  of  the  financial  history  and  progress  of  the  customer  contributed 
by  liimself,"  and  the  bank  officer  should  see  that  this  history  is  plainly 
written. 

Depositors  drawing  on  to-day's  deposit  should  be  reported  to  the 
officers,  as  in  one  sense  the  customer  doing  this  overdraws  his  account, 
not  having  had  the  money  to  his  credit  when  the  cheek  was  drawn. 

The  officers  should  also  be  informed  of  all  customers  drawing  on  the 
previous  day's  deposits  in  order  to  pi'event  "  kiting,"'  which  is  generally 
done  by  weak  customers,  and  your  system  should  show  this  at  a  glance. 

Accounts  should  also  be  kept  in  a  way  that  will  enable  the  officers 


IXSIDK    WORKINGS    OP    A    BANK.  459 

to  have  a  careful  average  made  of  the  balances.  In  many  banks  this  is 
not  done  on  account  of  the  time  and  labor  necessary,  but  if  officers 
could  only  realize  the  importance  of  having  a  correct  average  of  tlie 
account  of  every  depositor,  month  by  month  and  year  by  year,  from 
which  they  could  gather  a  large  number  of  valuable  statistics,  it  would 
shoAV  them  in  many  cases  whether  they  were  making  or  losing  money. 

The  method  of  averaging  an  account  is  simple.  Banks  connected 
with  Clearing-Houses  have  only  to  deduct  the  exchanges  from  the 
depositor's  balance  of  that  morning  and  add  the  different  balances 
together,  dividing  by  the  actual  number  of  working  days  in  the  month, 
to  show  the  depositor's  average  for  that  month.  In  cities  where  there 
are  no  Clearing-Houses  this  principle  can  be  carried  out  by  deducting 
the  checks  paid  that  day,  but  drawn  previously. 

A  system  Avhieh  appears  to  cover  all  these  points  would  embrace 
the  old-fashioned  dealers'  ledgers,  in  which  the  postings  are  made  from 
the  books  after  having  been  written  in  by  check  clerks,  combined 
with  the  balance  ledgers  (or  skeleton  ledgers,  as  they  are  sometimes 
called),  to  which  the  postings  are  made  fr'Ui  the  deposit  tickets  and 
checks  themselves,  a  proof  of  every  account  being  taken  each  day. 
Pas.^-books  can  be  balanced  on  the  dealers'  ledgers,  and  when  each 
book  has  been  written  up  a  careful  comparison  should  be  made  with 
the  balance  ledger,  and  at  least  once  a  month  every  account  sliould  be 
called  back  between  the  two  ledgers.  The  balance  ledger  will  show 
exactly  the  condition  of  the  account  at  the  close  of  each  day,  and  a 
careful  average  of  the  same  can  be  made.  The  dealers'  ledger  will 
show  the  other  part  of  the  history. 

Tliis  system  of  course  necessitates  the  keeping  of  a  double  force  of 
book-keepers,  but  where  there  is  a  large  number  of  accounts,  many 
having  similar  names,  a  system  of  this  kind  is  a  good  preventive  against 
error,  but  the  ledger-keepers  of  both  classes  should  be  changed  from 
time  to  time  and  careful  examinations  made. 

JOURNAL    ENTRIES   VS.    CHARGE    TICKETS. 

Entries  on  the  books  of  a  bank  may  be  divided  into  several  classes : 

1st.  Those  made  directly  from  customers'  checks  and  deposit 
tickets. 

2d.  Such  as  are  made  directly  from  the  mail. 

3d.  Miscellaneous  class  of  entries  for  which  the  bank  always  has 
vouchers  of  some  kind. 

4th.  Entries  which  are  not  represented  by  vouchers.  To  this  last 
class  more  particular  reference  is  made  on  another  page. 

In  speaking  of  journal  entries  I  refer  to  the  system  in  vogue  in 
some  banks  where  clerks  enter  directly  on  the  books,  without  any 
memoranda,  various  charges  and  credits,  which  are  not  seen  by  the 
officers. 

It  has  been  argued  in  favor  of  this  system  that  a  bank  oflOicer  can 
make  a  careful  examination  each  day  of  every  journal  entry.     I  admit 


460  PRACTICAIi   BAIN'KIXG. 

that  this  can  be  done,  but  you  are  making  a  clerk  of  the  officer  and  are 
paying  a  high-priced  man  for  doing  work  which  under  a  different  system 
could  be  done  by  clerks,  equally  as  well. 

Just  here  is  one  of  the  chief  mistakes  of  the  day  in  banking  circles. 
Bank  officers  are  doing  a  large  amount  of  detail  work  which,  if  properly 
systematized,  could  be  handled  by  others.  An  officer  is  chosen  to  a 
position  that  he  may  dii-ect  the  affairs  of  the  institution.  He  is  sup- 
posed to  have  certahi  capabilities  that  other  men  do  not  possess;  to  be 
a  man  of  executive  ability  and  to  handle  and  place  men  in  positions 
where  they  can  do  the  best  work,  and  in  general  he  is  the  du-ecting 
power  of  the  bank.  Notwithstanding  all  this,  there  are  too  many 
officers  who  are  wasting  time  over  unimi^ortant  matters  which,  by 
a  little  careful  thought,  could  be  delegated  lo  the  clerks  who  would  do 
it  much  better^  because  their  minds  are  perfectly  free  and  clear  from 
other  business  matters.  An  officer  should  be  able  to  find  among  his 
force  of  clerks  from  one  to  a  dozen  men  (according  to  the  size  of  the 
institution)  who  can  attend  to  certain  matters  of  detail  better  than 
himself,  and  it  shoidd  be  his  province  and  good  generalship  to  select 
men  for  that  particular  class  of  work.  This  would  lelieve  his  shoulders 
of  many  burdens,  keep  his  mind  free  for  large  matters  and  enable  him 
to  grasp  the  reins  of  the  whole  bank  and  drive  it  to  success. 

There  is  altogether  too  much  petty  jealousy  among  bank  officers,  of 
men  below  them.  It  may  be  truthfully  said  that  any  competent 
officer  need  have  no  fear  of  a  flrst-class  man  coming  up  behind  him  if 
he  wisely  directs  him,  as  that  man  will  always  contribute  to  his  success 
and  the  more  first-class  men  there  are  growing  up  around  him  the  more 
successful  he  and  his  bank  will  be.  The  word  "jealousy''  should  be 
stricken  out  of  a  good  bank  officer's  dictionary  and  he  should  so  culti- 
vate the  acquaintance  of  his  men  as  to  bring  out  their  best  qualities  in 
order  that  they  may  all  contribute  to  his  success  as  an  officer.  This 
may  seem  a  digression  from  the  subject  but  many  bank  men  contend 
that  an  officer  can  overlook  journal  entries,  but  a  system  should  be 
provided  which  will  answer  the  same  purpose  without  the  officer  per- 
forming the  duties  of  a  mere  clerk.  Too  many  officers  are  to-day  acting 
as  Discount  Clerks,  Tellers,  Book-keepers,  etc.,  in  large  banks,  whereas 
if  affairs  were  managed  properly  the  bank  would  take  a  new  lease  of 
life  and  the  officers  could  in  turn  devote  their  time  to  the  best  interests 
of  the  institution. 

In  the  use  of  charge  tickets  there  is  a  much  better  system  than 
that  based  on  journal  entries.  The  clerks  should  be  instructed  to  make 
out  a  charge  ticket  for  every  irregular  entry  which,  bearing  the  signature 
of  the  maker  and  embodying  an  explanation  of  the  entry,  should  be 
handed  to  one  of  the  officers  for  his  initial.  By  requiring  oarh  clerk  to 
make  out  charge  tickets  correcting  his  own  errors.and  ha\ing  him  present 
them  to  an  officer  to  be  initialed,  he  is  brought  face  to  face  with  the 
error  which  often  has  a  good  effect  and  tends  to  make  him  more  careful ; 


INSIDE    WORKINGS    OF    A    BANK.  461 

and  it  would  also  prevent  the  making  of  tickets  to  correct  supposed 
errors  whicli  do  not  exist.  A  ticket  should  never  be  entered  without 
having  been  initialed.  The  officer  should  also  be  handed  any  advice 
or  statement  pertaining  to  or  showing  a  reason  for  the  entry.  In  the 
case  of  advice  of  credit  by  an  out-of-town  correspondent  the  advice 
should  always  aQcompany  the  ticket,  to  enable  the  officer  to  see  that 
no  irregular  charges  have  been  made.  The  officer  can  thus  see  at  a 
glance  the  reason  for  the  entry  and  can  pass  upon  it  immediately.  A 
large  number  of  defalcations  have  been  concealed  by  making  irregular 
charges  in  correspondents'  accounts  whereas  if  a  system  of  this  kind 
had  been  used  it  would  not  have  been  likely  to  occur. 

The  officers  should  never  make  out  a  charge  ticket  themselves  and 
that  fact  should  be  clearly  understood  throughout  the  bank. 

With  the  use  of  charge  tickets  every  entry  should  have  something 
to  show  for  it.  A  careful  system  of  calling  off  and  checking  back  the 
entries  of  each  day's  work  should  be  arranged,  in  which  the  man 
who  makes  the  entries  should  not  be  allowed  to  call  back.  Clerks 
calling  should  be  instructed  to  check  every  entry  and  report  to  the 
officers  any  that  do  not  have  a  proper  voucher,  or  any  charge  ticket 
not  signed  by  an  officer.  After  the  books  have  been  carefully  called 
back  and  cheeked  the  man  calling  should  sign  his  name  first  and  the 
one  looking  on,  second,  thus  preserving  a  record  of  the  parties  checking 
the  work.  The  men  writing  in  and  footing  the  books  should  be 
instructed  to  bring  down  the  footings  in  ink  and  sign  before  each  footing 
at  the  close  of  the  day's  work,  and  in  carrying  a  footing  from  one  book 
to  another  the  party  making  the  transfer  should  place  his  signature 
before  it.  The  cliief  clerk  should  have  careful  instructions  to  see  that 
all  the  books  are  properly  signed,  footings  brought  down  and  signatures 
attached  within  twenty-four  hours;  in  this  way  some  one  is  held 
responsible  for  every  entry  on  the  books  of  the  bank,  and  all  the 
irregular  entries  are  presented  to  the  officers  through  charge  tickets 
with  explanations  which  should  be  carefully  written  on  the  books  to 
show  in  posting  that  they  are  charge  tickets  and  not  regular  entries. 
This  system  can  be  carried  out  in  large  as  well  as  small  banks  and  will 
be  found  to  work  admirably. 

WHAT   IS   THE   BEST  METHOD    OP    OPENING   LEDGERS? 

There  is  nothing  more  disagreeable  to  the  average  bank  officer  than 
to  be  informed  that  it  is  necessary  to  open  a  new  Ledger.  It  is  a  very 
serious  question  in  some  banks,  especially  where  the  volume  of  business 
is  so  great  that  the  entire  time  of  the  Book-keeper  is  occupied  in 
posting  and'handling  each  day's  transactions.  The  mere  thought  of 
opening  a  new  Ledger  suggests  late  hours,  and  consequently,  as  with 
all  difficult  matters,  it  is  put  off  until  the  last  moment. 

One  of  the  first  rules  to  be  laid  down  in  regard  to  opening  Ledgers 
is  that  a  careful  survey  of  the  old  Ledger  should  be  made  by  the  Book- 
keeper and  he  should  note  how  fast  it  is  being  used  up.     A   new 


462  PKACTICAIi    BANKING. 

Ledger  should  be  ordered  at  least  six  months  in  advance  of  the  date 
for  opening,  thus  giving  ample  time  for  the  proper  seasoning  of  the 
book,  whieli  is  of  great  importance  to  a  book  receiving  the  hard  usage 
that  a  bank  Ledger  does  from  day  to  day. 

In  ordering  a  Ledger  economy  should  not  be  considered.  The  book 
should  be  "well  bound,  of  the  best  paper,  and  after  giving  the  matter 
careful  consideration  and  trial,  I  am  prepared  to  recommend  using  a 
patent  back,  which  will  allow  the  book  to  be  opened  freely :  even  with 
this,  every  fifth  or  sixth  page  should  be  strengthened  with  linen  strips. 

The  longer  a  Ledger  can  be  made  to  run  without  confusing  the 
accounts  the  better  it  is  for  the  bank  and  Book-keeper,  as  it  can  be 
used  for  reference  for  a  greater  length  of  time,  and  it  saves  handling  a 
large  number  of  books.  Bank  Ledgers  should  never  be  destroyed, 
consequently  they  should  be  strengthened  in  every  possible  manner, 
and  great  care  used  in  their  manufacture  and  construction. 

Many  banks  are  to-day  using  the  old  style  of  ruling  on  Ledgers, 
with  debit  and  credit  columns  on  one  page;  but  by  investigation  it 
will  be  found  that  a  Ledger,  ruled  as  the  sample  shown  herewith,  with 
double  rulings  on  a  page  and  lines  close  together,  will  answer  every 
purpose  and  make  it  possible  to  use  the  book  twice  as  long  as  the 
ordinary  Ledger.  The  sample  gives  one-half  of  a  page  in  width,  and 
the  depth  may  be  the  full  length  of  the  paper.     (See  Form  93.) 

After  a  Ledger  has  been  ordered  and  well  seasoned,  and  is  ready 
for  use,  the  question  arises :  How  can  an  overworked  Book-keeper  (or 
one  who  is  not  overworked)  open  it  to  the  best  advantage  ? 

The  system  I  am  about  to  outline,  which  was  first  originated  by 
Mr.  Frank  Dean,  the  Assistant  Cashier  of  The  Fifth  Avenue  Bank,  of 
Is  ew  York,  enables  the  Book-keeper  himself  to  open  the  Ledger  in  a 
careful,  systematic  way,  taking  plenty  of  time  to  do  it;  and,  if  over- 
worked, it  gives  an  ofiicer  the  opportunity  to  afford  liim  assistance 
without  interfering  with  the  regular  work  of  the  bank. 

To  facihtate  comi^arison  of  accounts  in  banks  where  Balance,  as 
well  as  Individual  Ledgers,  are  kept,  the  names  on  both  Ledgers  should 
run  as  nearly  alike  as  possible,  and  at  least  a  month  before  opening  the 
Ledger  the  Balance-Ledger  keepers  should  be  requested  to  carefully 
rearrange  tlioir  accounts  alphabetically  and  according  to  the  proper 
vowels,  and  charge  out  to  "Unclaimed  Balances  "all  accounts  wliich 
have  become  inactive  and  have  reduced  balances.  A  list  of  these 
accounts  charged  out  should  be  given  to  one  of  the  officers,  which  will 
enable  him  to  see  what  accounts  are  doing  less  business,  and,  if  neces- 
sary, make  inquiry  and  learn  ..why  they  are  not  active.  After  the 
accounts  have  been  rearranged  the  names  should  be  copied  into  a 
carefully  prepared  vowel  index,  which  should  be  ordered  with  the 
Ledger.  In  blanks  where  no  Balance  Ledgers  are  kept  the  same  process 
may  be  used  in  handling  the  old  Ledgers. 

After  the  names  have  been  copied  into  the  index,  the  question  arises, 


Form  93.     sample  ledger  Ruling. 


C) 

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Co 

INSIDE    WORKINGS    OF    A   BANK. 


463 


How  long  is  it  expected  that  the  new  Ledger  will  run,  and  how  many 
pages  shall  be  allowed  to  each  account  considering  that  they  will  use 
the  same  number  in  proportion  that  they  have  heretofore  ?  Provide 
space  for  new  accounts  and  have  them  all  run  evenly  and  thus  fill  up 
the  Ledger  with  as  little  transferrmg  as  possible. 

We  should  now  take  the  old  Ledger  and  ascertain  the  length  of  time 
it  has  been  used  and  estimate  the  number  of  pages  each  account  will 
require  in  the  now  Ledger,  noting  same  in  pencil  in  front  of  the  name  in 
the  index.  Afte^  this  process  has  been  completed,  add  the  number  of 
pages  allowed  for  the  accounts  in  each  vowel,  then  prepare  a  diagram 
as  below  (see  Form  94)  [wliich  is  prepared  on  a  basis  of  an  A  to  C,  1500 
page,  Ledger],  and  enter  the  number  of  pages  allowed  for  each  vowel. 


a 

e 

i 

0 

u 

J 

Totals. 

A 

60 

100 

55 

40 

25 

10 

290 

B 

110 

UO 

96 

103 

SO 

30 

559 

c 

79 

93 

52 

60 

24 

11 

319 

Total  No.  of  pages 
for  accounts 

249 

333 

203 

203 

129 

51 

1168 

Forni  94. 

On  the  diagram  shown  there  is  a  total  of  290  accounts  in  "A" 
divided  among  the  vowels;  "  B,"  559 ;  "  C,"  319 ;  making  a  total  of  1,168 
open  accounts.  The  footing  of  the  accounts  is  proven  by  both  vertical 
and  horizontal  addition  of  totals,  which  should  always  be  done  or  one 
may  be  thrown  out  on  the  general  result.  Deduct  the  whole  number 
of  pages  allowed  to  the  accounts  on  the  index  from  the  total  number 
of  pages  in  the  Ledger,  and  you  ascertain  the  number  of  pages  to  be 
distributed  among  the  vowels.  In  the  illustration  there  are  332  extra 
pages ;  (1500-1168  =  332),  therefore  that  number  of  pages  is  to  be  divided 
equally  among  the  diiferent  vowels.  To  find  the  number  of  pages 
to  be  allotted  after  each  vowel  divide  decimally  the  total  of  extra 
pages  by  the  total  of  pages  allowed  for  the  accounts,  as  follows: 
832  H-  1168  =  .  2&42  +.  Now  multiply  this  quotient  by  the  total  number 
of  pages  allowed  for  each  vowel,  and  the  result,  as  per  diagram  below 
(see  Form  95),  gives  the  number  of  extra  pages  to  each  vowel;  these 
totals  are  also  proved  vertically  and  horizontally,  which  is  of  impor- 
tance. Of  course,  in  figuring  decimally,  one  may  be  obliged,  on 
account  of  fractions,  to  allot  a  few  extra  pages  to  the  larger  vowels  to 
make  the  scheme  prove,  deducting  them  from  another  vowel. 

After  you  have  carefully  schemed  out  the  number  of  pages,  as  in 
Form  95,  add  the  total  allowed  in  your  estimate  to  the  total  of  extra 
pages  for  ''A,"  and  the  result  gives  the  page  on  which  that  letter 
should  end,  in  this  case  p.  373.     Letter  "B"  should  commence  on  the 


4G4 


PRACTICAL    BANKING. 


following  page  and  end  on  page  1.091.  *"C"  sshould  commence  un 
page  1,092  and  continue  to  the  end  of  the  Ledger.  After  this  has  been 
done  enter  in  ink  opposite  each  name  in  the  index  the  nimiber  of  the 
page  on  which  the  account  is  to  commence,  keeping  a  tally  by  adding 


A.' 

17 

2S 

16 

12 

7 

3 

S3 

B 

SI 

40 

27 

29 

23 

9 

159 

0 
c 

22 

26 

15 

17 

7 

3 

90 

Total  No.  of  extra 
pages 

70 

94 

5S 

5S 

37 

15 

332 

Form  95. 

to  the  page  number  tlie  number  of  pages  allowed  for  the  account  in 
question  as  per  your  pencil  memoranda.  Proceed  carefully  through 
the  index,  proving  each  vowel  by  adding  the  total  allowed  for  that 
vowel  to  the  previous  footing,  thus: 

Total  number  of  pages  allowed  for  "Aa,"  as  per  scheme 60 

(Last  '"Aa"  should  be  entered  on  page  60.) 

Extra  pages  allowed  for  "Aa" 17 

(Therefore  the  first  "Ae"  should  be  on  page  78.)  77 

Total  number  of  pages  allowed  for  "Ae" 100 

(Last  *•  Ae"  should  be  entered  on  page  177.) 

Extra  pages  allowed  for  "Ae" 28 

Consequently  the  first  "Ai"  should  be  on  page  206.  205 

And  thus  proceed  through  the  entire  index.  Any  diiierences  should 
be  corrected,  and  each  letter  should  end  on  the  page  previously 
determined  upon. 

The  principal  part  of  the  work  of  opening  the  Ledger  has  now  been 
aceomphshed.  The  Book-keeper  who  has  charge  of  the  Ledger  or  one 
of  the  other  clerks  can  take  the  index  as  prepared  and  insert  the 
Ledger  headings,  always  being  assured  that  he  will  come  out  right  in 
the  end.  The  pages  allowed  for  the  accounts  will  thus  run  as  long  as 
the  Ledger  is  in  use  and  as  nearly  even  as  mathematical  precision  can 
make  them. 

In  heading  a  Ledger  use  good,  black  ink,  writing  a  large,  bold  hand. 

In  using  a  double-ruled  Ledger,  as  per  diagram,  one  page,  of  course, 
is  equal  to  two  of  the  old  style,  and  the  Book-keeper  should  be  able  to 
turn  to  the  accounts  which  are  written  on  the  lower  part  of  the  page 
as  readily  as  though  he  were  using  an  account  for  each  page;  and  as 
most  Ledger-keepers  "'thumb  up"  with  the  right  hand,  opening  and 
turning  to  the  right,  it  is  a  good  plan  to  put  on  the  upper  left-hand 
corner,  writing  small,  with  blue  ink,  the  names  of  accounts  on  the  left- 
hand  page  and  those  of  the  right-hand  page  in  red;  thus  the  Book- 
keeper will  be  enabled  to  turn  to  them  without  delay. 

After  the  index  has  been  prepared  and  the  Ledger  headings  entered 
you  are  ready  to  transfer  the  balances.  For  a  month  previous  to  the 
time  of  opening,  the  Book-keeper  should  keep  the  old  Ledger  footed  as 


INSIDE   WORKINGS    OP    A   BANK.  165 

close  as  possible.  x\.  rubber  stamp  should  be  prepared  bearing  the  date 
upon  which  the  new  Ledger  is  to  be  opened,  and  reading  say  thus : 
1890. 
"Aug.  1.  Bal.  trans,  fr.  Led.  No.  20." 
which  should  be  carefully  stamped  on  each  account  in  the  new  Ledger. 
On  the  last  day  of  the  month  all  the  accounts  in  the  old  Ledger  should 
be  footed  and  next  day's  postings  should  be  entered  in  the  new  Ledger. 
From  day  to  day  the  Book-keeper  should  strike  the  balances  on  the  old 
Ledger  and  transfer  them  to  the  new  one,  at  the  same  time  making  a 
note  of  the  names  and  amounts  in  a  separate  book.  After  all  have 
been  transferred,  carefully  compare  with  the  Balance  Ledger,  if  one  is  in 
use,  correct  all  differences  and  prove  the  Ledger,  signing  and  handing 
the  proof  to  one  of  the  officers.  In  large  banks  it  should  be  a  rule 
that  balances  should  be  transferred  to  the  new  Ledger  and  the  same 
proved  not  later  than  thirty  days  from  date  of  opening,  and  this  will 
not  work  any  hardship  on  the  Book-keeper. 

In  the  work  before  outlined  it  will  be  noticed  that  it  can  be  done  by 
the  Book-keeper  or  taken  out  of  his  hands  after  the  index  has  been 
prepared,  and  the  balance  of  the  work  can  be  done  by  any  clerk  in  the 
bank.  This  is  of  great  importance  in  large  institutions  where  a  Book- 
keeper's position  is  no  sinecure. 

After  the  Ledger  has  been  opened  three  months,  the  officer  having 
the  matter  in  charge  should  have  a  careful  list  prepared  of  all  depositors 
whose  pass-books  have  not  been  balanced  within  that  time.  He  should 
cause  a  personal  letter  to  be  written,  signed  by  himself,  which  will  have  , 
the  desired  effect  of  bringing  in  the  outstanding  books ;  thus  he  will 
have  the  satisfaction  of  knowing  that  the  bank  work  has  been  carried 
up  to  date  and  all  vouchers  have  been  returned  to  the  owners. 

HOW   TO    HANDLE    STOPPED    CHECKS. 

Morse  says:  ''  A  check  is  simply  a  written  order  of  a  depositor  to  his 
bank  to  make  a  certain  payment ;  it  is  executory,  and  as  such  it  is  of 
course  revocable  at  any  time  before  the  bank  has  paid  or  committed 
itself  to  pay  it.  The  bank  is  the  drawer's  agent ;  its  primary  duty  is  to 
hold  or  pay  his  money  as  he  directs.  Primarily  it  owes  no  duty  to  the 
holder  except  under  and  by  virtue  of  directions  from  the  drawer  until 
by  reason  of  these  directions  it  has  assumed  voluntary  or  by  action  of 
law  has  involuntarily  come  under  secondary  and  superseding  obliga- 
tions to  the  holder.  The  latest  orders  fi-om  the  drawer  govern  its  right 
to  act  on  his  behalf." 

This  being  the  case  there  is  hardly  a  bank  that  has  not  more  or  less 
trouble  with  ' '  orders  "  from  depositors  to  stop  payment  of  checks,  and 
if  there  is  any  one  thing  needing  careful  attention  it  is  a  system  which 
will  rigidly  guard  against  the  payment  of  such  stopped  checks.  A 
large  bank  with  three  or  four  Tellers  is  more  liable  to  mistakes  of  this 
kind  than  an  institution  where  all  the  checks  pass  under  the  eyes  of 
one  or  two  Tellers.     The  first  thing  to  be  provided  is  a  proper  stopped 


466  PRACTICAL    BAXKIXG. 

payment  blank,  and  for  the  sake  of  convenience,  a  form  is  given  (see 
Form  96),  to  be  used  when  a  duplicate  check  or  draft  is  to  be  issued 
and  the  original  stopped. 


1S9 


THE  RESERVE  NATIONAL  BANK, 

Of  the  City  of  New  York. 
Gentlemen : 

Please  take  note  that  tve  have  this  day  issued 
Duplicate  of  our  Draft  No 

dated  - ,  189  ,  to  order  of 

,  for 

$ ,  the  Ojnginal  thereof  not  having  been 

paid  according  to  your  account  current  last  ren- 
dered to  -,  IS 9  . 

Please  refuse  payment  on  Original  of  the  above 
described  draft 

Yours  respectfully, 


TO  OUR  CORRESPONDENTS: 

Please  exercise  care  in  examination  of  accounts  rendered,  as  Dupli- 
cates will  only  be  paid  upon  receipt  of  above  notice  of  their  issue. 

In  issuing  Duplicates,  please  make  them  of  the  same  tenor  and  date 
as  the  Original,  w^riting  the  v/ord  "Duplicate"  and  date  of  this  order 
across  the  face.  Respectfully, 

Form  96.  JOHN  H.  SMITH,  Cashier. 

It  will  be  noticed  that  two  good  points  are  secured  by  this  blank, 

viz. :  correspondents  or  depositors  are  obliged  to  note  that  they  have 

carefully  examined  their  account  currents  or  pass-books  and  that  the 

original  check  has  not  been  paid.     A  very  common  mistake  has  often 

been  made    by   depositors  neglecting  to   thoroughly   examine   their 

vouchers  before  issuing  an  order  for  stoppage,  and  many  complications 

have  thereby  arisen.     Another  point  is  covered  by  the  dating  of  the 

duplicate  draft  or  check  which  in  all  cases  must  agree  with  the  date  of 

the  order.     This  prevents  a  dishonest  person  from  u.sing  a  check  upon 

which  payment  has  been  stopped  by  writing  ' '  duplicate  "  across  its  face, 

Though  seemingly  of  slight  importance,  many  banks  have  been  swindled 

extensively  in  this  manner,  but  by  using  this  simple  device  you  have  a 


IXSIDE    WOHKIXGS    OF    A    BAXK.  467 

preventiv'c,  as  a  swindler  would  not  be  likely  to  know  the  date  of  the 
order  stopping  the  check. 

Upon  receipt  of  an  order  to  stop  payment  of  a  cheek  the  Paying- 
Teller  should  be  notified  at  once  and  the  other  Tellers  immediately 
thereafter,  as  very  often  stoppage  orders  are  given  hurriedly  and  no 
delay  should  occur  in  putting  the  notice  in  the  Tellers'  hands.  An 
instance  will  illustrate  this  point :  Some  time  ago  a  large  firm  having 
its  headquarters  in  a  Western  city,  failed.  Most  of  the  business  was 
transacted  through  the  New  York  partner,  and  a  few  days  before  the 
assignment  the  firm  negotiated  a  large  amount  of  single-name  paper, 
the  proceeds  of  which  remained  in  the  hands  of  the  note  brokers.  The 
latter  accidentally  came  down  to  their  office  a  little  earlier  than  usual 
on  the  morning  of  the  failure  and  found  waiting  at  the  door  the  New 
York  pai'tner  of  the  firm  who  stated  that  he  desired  a  check  for  the 
proceeds  of  the  notes.  The  brokers  thought  the  circumstance  rather 
strange  but  as  there  was  nothing  to  excite  suspicion  a  check  was  given. 
He  had  not  been  gone  from  the  ofiB.ce  more  than  fifteen  minutes  before 
the  brokers  received  a  telegram  from  the  West  announcing  the  suspen- 
sion of  the  fu*m;  it  then  lacked  ten  minutes  of  ten  o'clock.  A  member 
of  the  brokerage  firm  ran  immediately  to  the  bank,  reaching  it  within 
two  minutes  of  ten  o'clock,  ordered  the  stoppage  of  their  check  and 
handed  the  same  to  the  Cashier  who  delayed  a  few  minutes  before 
sending  to  the  Paying-Teller.  When  the  latter  was  notified,  the  Cashier 
was  told  that  the  partner  of  the  suspended  firm  had  been  waiting  on 
the  line,  and  the  moment  the  Paying-Teller's  window  was  opened  at  ten 
o'clock  had  had  the  check  certified.  As  the  order  to  stop  the  check 
was  in  the  hands  of  the  Cashier  before  the  certification  was  made,  it 
was  an  open  question  whether  the  bank  was  not  liable  for  the  amount. 
This  only  illustrates  how  promptly  orders  for  stopped  checks  should 
be  handled  and  that  they  should  have  precedence  over  all  other  orders. 

x\iter  the  Tellers  have  been  notified  and  memoranda  taken,  the 
order  for  stoppage  should  be  handed  to  the  Check-Clerk,  Avho  should 
examine  the  vouchers  of  the  depositor  to  see  if  the  check  has  already 
been  paid,  and  he  should  write  across  the  face  of  the  order  a  notice  to 
that  effect  or  that  the  check  has  not  been  paid,  signing  his  name  with 
the  date.  The  order  should  then  go  to  the  general  Book-keeper  who 
should  note  in  a  book  kept  for  the  purpose  a  full  description  as  to  date, 
payee,  etc.,  also  the  date  of  the  order  for  stoppage.  In  each  of  the 
Tellers'  departments  a  list  should  be  kept  of  all  checks  stopped, 
arranged  alphabetically  for  ready  reference.  These  lists  should  only 
contain  checks  stopped  within  the  previous  three  months,  and  the 
Tellers  should  be  instructed  not  to  pay  any  checks  dated  before  that 
period  without  looking  them  up  in  the  stopped-check  book  to  see  if 
there  is  anything  noted  against  them.  The  Book-keepers  should  also 
be  provided  with  copies  of  the  same  lists,  for  the  purpose  of  examining 
the  exchange  from  the  Clearing-House.     In  some  banks  where  it  is 


468  PRACTICAL  BANKING. 

deemed  advisable  to  relieve  the  Book-keepers  of  this  duty,  a  special 
mail  is  delegated  to  examine  the  exchanges  for  stopped  checks;  this 
can  also  be  done  in  the  Exchange  Teller's  department,  if  one  is  con- 
nected with  the  bank,  but  it  will  divide  the  Avork  and  fix  responsibiUty 
to  have  it  attended  to  by  the  Book-keepers. 

After  all  has  been  said  the  old  adage  remains  good,  that  ' '  eternal 
vigilance  "  on  the  part  of  all  concerned  is  the  price  of  safety,  when  you 
are  looking  out  for  stopped  checks. 


LAWFUL    MOXKY    RESEKVE    OF   iS•ATIO^■AL   BAXKS.  469 


CHAPTER    XXIX. 

LAWFUL-MONEY  RESERVE  OF  NATIONAL  BANKS. 

The  law  now  regulating  the  reserves  which  National  banks  are 
required  to  keep  on  hand  to  protect  their  deposits,  is  found  in  sections 
5.191,  5,192  and  5.195  of  the  Revised  Statutes  of  the  United  States  as 
modified  by  section  2  and  part  of  section  3  of  the  Act  of  June  20,  1874, 
and  by  sections  1  and  2  of  the  Act  of  March  3,  1887. 

The  text  of  these  sections,  including  methods  of  computation  and 
description  of  funds  available  for  reserve  under  the  law,  is  as  follows : 

[r.  S.  HE  VIS  ED  STATUTES.] 

(Sec.  5191.)  Every  National  banking  association  in  either  of  the  following  cities, 
Albany,  Baltimore,  Boston,  Cincinnati,  Chicago,  Cleveland,  Detroit,  Louisville,  Mil- 
waukee, New  Orleans,  New  York,  Philadelphia,  Pittsburgh,  Saint  Louis,  San  Francisco, 
and  Washington,  shall  at  all  times  have  on  hand,  in  laNN'ful  money  of  the  United  States, 
an  amount  equal  to  at  least  twenty-five  per  centum  of  the  aggregate  amoitnt  of  its 
notes  in  circitlation  and  its  deposits ;  and  every  other  association  shall  at  all  times  have 
on  hand,  in  lawful  money  of  the  United  States,  an  amount  equal  to  at  least  fifteen  per 
centum  of  the  aggregate  amount  of  its  notes  in  circulation,  and  of  its  deposits.  When- 
ever the  lawful  money  of  any  association  in  any  of  the  cities  named  shall  be  below  the 
amount  of  twenty-five  per  centum  of  its  circulation  and  deposits,  and  whenever  the 
lawful  money  of  any  other  association  shall  be  below  fifteen  per  centum  of  its  circulation 
and  deposits,  such  association  shall  not  increase  its  liabilities  by  making  any  new  loans 
or  discounts  otherwise  than  by  discounting  or  purchasing  bills  of  exchange  payable  at 
sight,  nor  make  any  dividend  of  its  profits  until  the  required  proportion,  between  the 
aggregate  amount  of  its  outstanding  notes  of  circulation  and  deposits  and  its  lawful 
money  of  the  United  States,  has  been  restored.  And  the  Comptroller  of  the  Cvu-rency 
may  notify  any  association,  whose  lawful-money  reserve  sliall  be  below  the  amount 
above  required  to  be  kept  on  hand,  to  make  good  such  reserve  ;  and  if  such  association 
shall  fail  for  thirty  days  thereafter  so  to  make  good  its  reserve  of  lawful  money,  the 
Comptroller  may,  with  the  concurrence  of  the  Secretary  of  the  Treasury,  appoint  a 
receiver  to  wind  up  the  business  of  the  association,  as  provided  in  section  fifty-two 
hundred  and  thirty-four. 

(Sec.  5192.)  Three-fifths  of  the  reserve  of  fifteen  per  centum  required  by  the  pre- 
ceding section  to  be  kept,  may  consist  of  balances  due  to  an  association,  available  for 
the  redemption  of  its  circulating  notes,  from  associations  approved  by  the  Comptroller 
of  the  Currency,  organized  under  the  act  of  June  3d,  eighteen  hundred  and  sixty-four, 
or  under  this  title,  and  doing  business  in  the  cities  of  Albany,  Baltimore,  Boston, 
Charleston,  Chicago,  Cincinnati,  Cleveland,  Detroit,  Louis^^lle,  Milwaukee,  New 
Orleans,  New  York,  Philadelphia,  Pittsburgh,  Richmond,  Saint  Louis,  San  Francisco 
and  Washington.  Clearing-House  certificates,  representing  specie  or  lawful  money 
specially  deposited  for  the  ptu-pose,  of  any  Clearing-House  association,  shall  also 
be  deemed  to  be  lawful  money  in  the  possession  of  any  association  belonging  to 
such  Clearing-House,  holding  and  owning  such  certificate,  within  the  preceding 
section. 

(Sec.  5195.)  Each  association  organized  in  any  of  the  cities  named  in  section  fifty-one 


470  PRACTICAJj    BAXKIXG. 

hundred  and  ninety-one  shall  select,  subject  to  the  approval  of  the  Comptroller  of  the 
Ciu-rency,  an  association  in  the  city  of  New  York,  at  which  it  will  redeem  its  circulating 
notes  at  par ;  and  may  keep  one-half  of  its  lawful-money  reserve  in  cash  deposits  in 
the  city  of  New  York.  But  the  foregoing  provisions  shall  not  apply  to  associations 
organized  and  located  in  the  city  of  San  Francisco  for  the  purpose  of  issuing  notes 
payable  in  gold.  Each  association  organized  A\ithin  the  cities  named,  shall  select, 
subject  to  the  approval  of  the  Comptroller,  an  association  in  either  of  the  cities 
named,  at  which  it  will  redeem  its  circulating  notes  at  par.  The  Comptroller  shall 
give  public  notice  of  the  names  of  the  associations  selected,  at  which  redemptions 
are  to  be  made  by  the  respective  associations,  and  of  any  change  that  may  be  made 
of  the  association  at  which  the  notes  of  any  association  are  redeemed.  Whenever  any 
association  fails  either  to  make  the  selection  or  to  redeem  its  notes  as  aforesaid,  the 
Comptroller  of  the  Currency  may,  upon  receiving  satisfactory  evidence  thereof,  appoint 
a  receiver  in  the  manner  provided  for  in  section  fifty-two  hundred  and  thirty-four, 
to  wind  up  its  affairs.  But  this  section  shall  not  relieve  any  association  from  its  liability 
to  redeem  its  circulating  notes  at  its  own  counter,  at  par,  in  lawfitl  money  on  demand. 
[ACT  OF  JUXE  20.  1S74.] 

Sec.  2.  That  section  thirty-one  of  the  "National  bank  act"  be  so  amended  that 
the  several  associations  therein  provided  for  shall  not  hereafter  be  required  to  keep  on 
hand  any  amount  of  money  whatever  by  reason  of  the  amount  of  their  respective 
circulations  ;  but  the  moneys  required  by  said  section  to  be  kept  at  all  times  on  hand 
shall  be  determined  by  the  amoitnt  of  deposits  in  all  respects,  as  provided  for  in  the 
said  section. 

Sec.  3.  That  every  association  organized,  or  to  be  organized,  under  the  provisions 
of  the  said  act,  and  of  the  several  acts  amendatory  thereof,  shall  at  all  times  keep  and 
have  on  deposit  in  the  treasury  of  the  United  States,  in  lawful  money  of  the  United 
States,  a  sum  equal  to  five  per  centum  of  its  circulation,  to  be  held  and  used  for  the 
redemption  of  such  circulation  ;  which  sum  shall  be  counted  as  a  part  of  its  lawful 
reserve,  as  provided  in  section  two  of  this  act. 

REQUIREMENTS   TO    BECOME    RESERVE    CITIES. 
[ACT  OF  MARCH  3,  1SS7.2 

Sec.  1.  That  whenever  three-fourths  in  number  of  the  National  banks  located  in 
any  city  of  the  United  States  having  a  population  of  fifty  thousand  people  shall  make 
application  to  the  Comptroller  of  the  Currency  in  writing,  asking  that  the  name  of 
the  city  in  which  such  banks  are  located  shall  be  added  to  the  cities  named  in  sections 
fifty-one  hundred  and  ninety-one  and  fifty-one  hundred  and  ninety-two  of  the  Revised 
Statutes,  the  Comptroller  shall  have  authority  to  grant  such  a  request,  and  every  bank 
located  in  such  city  shall  at  all  times  thereafter  have  on  hand,  in  lawful  money  of  the 
United  States,  an  amount  equal  to  at  least  twenty-five  per  centum  of  its  deposits,  as 
provided  in  sections  fifty-one  hundred  and  ninety-one  and  fifty-one  hundred  and 
ninety-five  of  the  Revised  Statutes. 

Sec.  2.  That  whenever  three-fourths  in  number  of  the  National  banks  located  in 
any  city  of  the  United  States  having  a  population  of  two  hundred  thousand  people 
shall  make  application  to  the  Comptroller  of  the  Cmn-ency  in  writing,  asking  that  such 
city  may  be  a  central  reserve  city  like  the  city  of  New  York,  in  which  one-half  of  the 
lawful  money  reserve  of  the  National  banks  located  in  other  reserve  cities  may  be 
deposited,  as  provided  in  section  fifty-one  hiuidred  and  ninety-five  of  the  Revised 
Statutes,  the  Comptroller  shall  have  authority,  with  the  approval  of  the  Secretary  of 
the  Treasury,  to  grant  such  request,  and  every  bank  located  in  such  city  shall  at  all 
times  thereafter  have  on  hand,  in  lawful  money  of  the  United  States,  twenty-five  per 
centum  of  its  deposits,  as  pro\'ldcd  in  section  fifty-one  hundred  and  ninety-one  of  the 
Revised  Statutes. 

It  will  be  seen  that  section  5191  names  sixteen  cities  (to  which  the 
names  of  Kansas  City,  St.  Joseph,  Mo. ,  and  Omaha,  Neb. ,  have  since 


LAWFUL  -  MONEY   RESERVE    OF    NATIONAL   BANKS.  471 

been  added  under  the  provisions  of  tlie  act  of  March  3,  1887),  each 
bank  located  in  any  one  of  which  is  required  to  have  on  hand  at  all 
times  lawful  money  of  the  United  States,  equal  at  least  to  25  per  cent, 
of  the  aggregate  amount  of  its  circulation  and  deposits ;  and  that  each 
bank  located  elsewhere  than  in  the  cities  named  is  required  to  have  on 
hand  lawful  money  at  least  equal  to  15  per  cent,  of  its  aggregate 
circulation  and  deposits.  We  have  thus  at  once  banks  of  two  classes, 
25  per  cent,  banks  and  15  per  cent,  banks. 

That  the  words  on  hand  in  this  section  do  not  mean  in  the  bank 
itself  -  in  its  own  vault  or  till — may  be  seen  from  sections  5192  and  5195, 
Section  5192  provides  that  three-fifths  of  the  reserve  which  15  per  cent, 
banks  are  required  to  keep  may  consist  of  balances,  available  for 
redemption  of  circulating  notes,  due  to  the  association  from  National 
associations  approved  by  the  Comptroller  of  the  Currency,  located  in 
any  of  the  sixteen  cities  named,  the  other  two-fifths  being  in  bank. 
Section  5195  provides  that  25  per  cent,  banks  outside  of  New  York 
may  each  keep  one-half  of  their  lawful  reserve  in  a  National  bank 
approved  by  the  Comptroller  located  in  New  York  city.  The  provisions 
in  the  sections  quoted  having  reference  to  the  redemption  of  circula- 
ting notes  of  National  banks  at  redemption  agencies  in  New  York 
and  other  reserve  cities  have  been  repealed  by  sections  1  and  2  of 
the  act  of  Jmae  20,  1874,  quoted,  leaving  still  in  force  the  right  to  keep 
a  certain  portion  of  their  required  reserve  with  banks  in  those  cities. 
Sections  1  and  2  of  the  Act  mentioned  also  repeal  all  provisions  requir- 
ing reserve  on  circulating  notes,  except  in  the  case  of  gold  banks." 

Instead  of  reserve  on  circulation,  each  National  bank  is  requued  to 
keep  at  all  tim'es  with  the  Treasurer  of  the  United  States,  in  lawful 
money,  a  sum  equal  to  5  per  cent,  of  its  circulation.  This  five  per 
cent,  fund  is  also  permitted  to  be  counted  as  a  portion  of  the  reserve 
on  deposits.  The  25  per  cent,  banks  are  divided  into  two  classes: 
those  in  New  York,  Chicago  and  St.  Louis  and  those  in  the  other 
reserve  cities. 

In  New  York,  Chicago  and  St.  Louis  the  required  reserve  is  25  per 
cent,  of  deposits,  all  of  which  must  be  in  bank. 

In  the  other  reserve  cities  the  required  reserve  is  also  25  per  cent,  of 
deposits,  only  one-half  or  12%  per  cent,  of  which  need  be  kept  in  bank, 
the  remaining  I2J2  per  cent,  can  be  deposited  in  New  York  with  ap- 
proved reserve  agents. 

Outside  of  New  York,  Chicago  and  St,  Louis  and  the  other  reserve 
cities  the  reserve  is  15  per  cent,  of  deposits,  two-fifths  to  be  kept  in 
bank  and  three-fifths  in  New  York,  or  in  any  of  the  other  reserve 
cities. 

These  various  percentages  must  be  computed  on  the  aggregate 
deposits,  that  is,  on  all  deposits  wliich  appear  on  the  balanced  state- 
ment of  the  bank.  It  is  very  doubtful  whether  National  banks  have 
*  Gold  banks  obsolete. 


472  PRACTICAL    BANKIXG. 

power  either  to  take  time  deposits  or  to  borrow  money  and  create  bills 
payable.  At  all  events  it  is  believed  that  "whatever  agreement  may  be 
made  with  a  depositor  or  party  from  whom  money  is  received  on  time, 
or  borrowed,  the  bank  would  be  obliged  to  pay  on  demand  if  the  other 
parties  did  not  choose  to  adhere  to  their  agreement.  For  tliis  reason 
all  time  deposits  or  bills  payable  reported  by  National  banks  are  held 
to  require  a  reserve  the  same  as  other  deposits. 

Deposits  are  divided,  for  the  pui'poses  of  computing  reserve,  into 
two  classes,  viz. ;  Bank  deposits — that  is  amounts  due  to  banks — in  one 
class,  and  all  other  deposits  in  the  other.  Certain  deductions  are 
allowed  from  the  gross  deposits.  First,  checks  in  exchanges  can  be 
deducted  from  deposits  of  any  class;  but,  second,  amounts  due  from 
banks  can  only  be  deducted  from  amounts  due  to  banks,  and  this  must 
be  particularly  noted.!  In  a  bank  belonging  to  or  dealing  through  a 
Clearing-House,  the  Clearing-House  exchanges  are  the  only  checks 
which  can  properly  be  deducted  from  deposits,  but  in  a  bank  located 
where  there  is  no  Clearing-House  it  is  allowable  to  reduce  the  deposits 
by  cheeks  on  banks  in  same  town  or  city.  If  banks  desired  to  have 
checks  on  banks  in  same  place  allowed  as  a  deduction,  such  checks 
must  be  separated  in  the  schedule  of  checks  and  cash  items  on  the 

back  of  the  report. 

RESERVE    IN  BANK. 

The  funds  available  for  reserve  in  bank  are  comprised  under  the 
general  term,  lawful  money,  which  has  been  held  to  mean  gold  and 
silver  coin  of  the  United  States  and  legal-tender  notes.  By  special 
Statute,  Clearing-House  Certificates  are  available  for  reserve  (Section 
5192,  R.  S.)  In  the  same  way  are  available  United  States  gold  and 
silver  certificates  (Section  12  of  Act  July  12,  1882)  and  United  States 
certificates  of  deposit  of  legal-tender  notes  (Section  5193,  Revised 
Statutes)  and  Treasury  notes  of  the  Act  of  July  14,  1890.  There  were 
formerly  many  other  forms  of  certificates  and  Treasury  notes  available 
as  reserve  under  various  Statutes.  These  are,  however,  now  obsolete. 
All  the  forms  in  which  reserve  may  now  be  kept  have  been  mentioned. 
Some  of  these  obsolete  forms  were  the  compound  interest  notes,  7-30 
notes,  three  per  cent,  certificates,  etc. 

RESERVE    OUTSIDE    OP    BANK. 

With  the  15  per  cent,  banks  an  amount  with  an  approved  reserve 
agent  in  any  reserve  city  equal  to  but  not  exceeding  three-fifths  of  the 
total  reserve  required,  is  available  for  reserves.  With  25  per  cent, 
banks,  not  located  in  New  York  city,  an  amount  with  an  approved 
reserve  agent  not  exceeding  one-half  of  the  total  reserve  required,  is 
available  for  reserve. 

The  5  per  cent,  fund,  to  an  amount  not  exceeding  5  per  cent,  of  the 
circulation  of  the  bank,  is  allowed  to  protect  deposits.     In  the  twenty- 
five  per  cent,  banks  it  will  protect  4  times,  and  in  the  fifteen  per  cent. 
*■  Tlie  allowance  of  any  dednction  whatever  is  a  nilinix  of  the  Comptroller's  office. 


LAWFUL -MONET  RESERVE  OP  NATIONAL  BANKS. 


473 


Ijanks  6  2-3  times  its  own  amount  of  deposits.  In  all  computations 
given  hereafter  allowance  is  made  at  these  rates  for  this  fund.  No 
amount  with  the  Treasurer  of  the  United  States  in  excess  of  5  per  cent, 
of  circulation  can  count  as  reserve. 

BLANK   REPORT. 

On  page  474  is  printed  the  form  of  blank  sent  to  National  banks  by 
the  Comptroller  of  the  Currency,  to  enable  them  to  make  the  reports 
required  by  law. 

In  this  blank  the  items  used  in  computing  reserve  have  been  dis- 
tinguished in  the  printing.  The  items  of  deposits  on  the  Cr.  side 
have  been  printed  in  small  capitals,  as  well  as  the  items  of  deduc- 
tions on  the  Dr.  side.  The  items  available  for  reserve  have  been 
printed  in  italics.  An  inspection  of  this  blank  will  show,  at  a  glance, 
all  items  upon  which  reserve  is  required,  those  which  are  allowed 
as  deductions,  and  those  which  are  treated  as  available  for  reserve,  in 
the  computations  made  in  the  office  of  the  Comptroller  of  the  Currency. 

The  computations  divide  themselves  naturally  into  the  three 
classes  already  indicated : 

1st. — Twenty-five  per  cent,  banks  in  New  York,  Chicago  and  St.  Louis,  where 
all  reserve,  with  the  exception  of  the  Five  per  cent.  Redemption  Fund,  is 
kept  in  bank.     Under  this  head  but  one  example  is  necessary. 

2d. — Twenty -five  per  cent,  banks  in  other  reserve  cities.  To  illustrate  the  com- 
putation of  reserve  for  this  class  of  banks,  four  examples  will  be  given. 

3d. — Fifteen  per  cent,  banks.  The  method  of  computing  the  reserves  of  banks 
of  this  class  vdW  also  be  illustrated  by  four  examples. 

Schedules  relating  to  lawful  money  reserve  which  accompany  the 
Report,  as  made  up  for  the  Comptroller  of  the  Currency : 

BALANCES  DUE  FMOM  OB   TO  APPROVED  RESERVE  AGENTS. 


FROM— 

TO— 

Enter  Name  and 
Location  of  Bank. 

Amount. 

Enter  Name  and 
Location  of  Bank. 

Amount. 

1 

CHECKS  AND 

OTHER  CASH  ITEMS. 

Checks  and  drafts  on* 
banks,  &c.  in  this  city.  1 

Checks   and   drafts   on  ) 

OTHER  BANKS f 

\ 

A  VERAUE  RESERVE  AND   INTEREST. 

Average  reserve  for  last  8U  days  (in  bank  and  with  reserve  agents)  was 

per  cent,  of  deposits  and  bank  balances. 
The  highest  rate  of  interest  paid  by  the  bank  on  Deposits  is per  cent. 

on  Money  Borrowed  is l^er  cent. 


474 


PRACTICAIi    BAXKIXG. 


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liAWFUli  -  MONEY    RESERVE    OF    NATIONAL    BANKS.  475 

RESERVE  OF  NATIONAL  BANKS  LOCATED  IN  NEW  YORK,  CHICAGO 

AND  ST.  LOUIS. 

There  is  very  little  intricacy  in  the  method  of  determming  the 
necessary  reserve  of  these  banks. 

All  that  is  necessary  to  be  required  must  be  kept  in  bank,  or  in  the 
regular  5  per  cent,  redemption  fund,  and  the  difficulties  arising  from 
a  division  into  reserve  with  reserve  agents  and  reserve  at  home  do 
not  occur. 

The  rule  is  as  follows : 

Rule. — Deduct  amounts  due  from  banks  from  amounts  due  to  the  same,  and  also 
deduct  exchanges  for  Clearing-House  and  bills  of  other  National  banks  from  all 
other  deposits,  add  together  the  results  of  the  subtractions  and  deduct  from  the  sum 
four  times  the  five  per  cent,  redemption  fund.  Twenty-five  per  cent  of  the  remainder 
is  the  required  reserve  which  must  all  be  in  bank,  in  one  of  the  forms  of  lawful 
money  or  certificates  available  for  reserve,  heretofore  described.  If  amounts  due 
from  banks  equal  or  exceed  amounts  due  to  the  same,  both  amounts  are  omitted 
from  the  computation. 

The  figures,  in  Report  No.  1  on  page  476,  represent  the  balance  sheet 
of  a  bank  in  one  of  the  tliree  central  reserve  cities  either  the  cities  of 
New  York,  Chicago  or  St.  Louis. 

REPORT  NO.  1. 

The  computation  of  the  reserve  for  the  state  of  facts  shown  in  this 
statement  is  given  below : 

Dividends  unpaid  (item  6,  Cr.) $24,375 

Indi\idual  deposits  (item  T,  Cr.) 13,712,616 

Demand  certificates  of  deposit  (item  8,  Cr. ) 200,245 

Certified  checks  (item  10,  Cr.) 544,344 

Cashier's  checks  outstanding  (item  11,  Cr.) 58,805 

$14,540,385 

Deduct  exchanges  for  C.  H.  (item  16,  Dr.) 81,904,173 

Deduct  bills  of  National  banks  (item  17,  Dr. ) ....      179,000    2,083,173 

— $12,457,212 

Due  to  banks  and  bankers  (items  14-15,  Cr.) $2,601,054 

Deduct  due  from  the  same  (items  8-9,  Dr.) 1,625,788         975,266 

Total  deposits  requiring  reserve $13,432,478 

5  per  cent.  Redemption  Fund  (item  22,  Dr.),  $22,500,  pro- 
tects four  times  its  own  amount ; 90,000 

Remainder $13,521,478 

25  per  cent,  of  remainder  ecpals  reserve  required $3,335,619 

all  of  which  must  be  in  bank. 

The  bank  held— Specie  (item  19,  Dr.) $3,697,886 

Legal- tender  notes  (item  20,  Dr.) 489,925       4,187,811 

Excess  of  reserve  held $852,192 

It  will  be  noticed  that  the  amounts  due  to  banks  largely  exceed 
the  amounts  due  from  the  same.  If  this  condition  were  reversed,  and 
the  amounts  due  from  banks  had  been  the  larger,  the  only  change  in 
the  computation  would  be  to  omit  amounts  due  to  and  from  banks 


476 


PRACTICAL    BAXKIXG. 


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LAWFUL  -  MONEY    RESERVE    OF    NATIONAL    BANKS.  477 

altogether.     The  computation  would  then  be  like  that  shown  in  the 
follomng  table : 

Sum  of  deposits  other  than  due  to  banks  after  deducting  exchanges. .  $12,457,212 
5  per  cent.  Kedemptiou  Fund,  $22,500,  protects  four  times  its  amount  90,000 


Remainder $12,367,212 


25  per  cent,  of  remainder  is  reserve  required $3,091,803 

Reserve  held 4,187,811 


Excess  of  reserve $1,096,008 

RESERVE    OF    NATIONAL    BANKS     LOCATED    IN    RESERVE     CITIES 
OTHER   THAN    NEW    YORK,    CHICAGO    AND    ST.  LOUIS. 

It  is  only  necessary  to  repeat  that  the  total  required  reserve  in 
these  banks  is  25  per  cent,  of  net  deposits.  One-half  of  this  25  per 
cent,  may  be  kept  with  approved  reserve  agents  in  the  cities  of  New 
York,  Chicago  or  St.  Louis ;  the  remaining  half  being  required  to  be 
kept  in  bank. 

The  figures  given  in  Report  No.  2,  on  page  478,  represent  the  balance 
sheet  of  a  bank  of  this  class,  showing  a  deficiency  both  in  the  reserve 
at  home  and  in  that  with  reserve  agents. 

REPORT  NO.  2. 

The  computation  of  reserve  on  these  figures  is  as  follows : 

Di\idends  unpaid  (item  6,  Cr.) $8 

Indi^•idual  deposits  (item  7,  Cr.) 864,899 

Demand  certificates  of  deposit  (item  8,  Cr.) 27,834 

Certified  checks  (item  10,  Cr.) 24,379 


$917,120 

Deduct  exchanges  (item  16,  Dr.) $37,314 

Deduct  bills  of  National  banks  (item  17,  Dr.) 3,663      40,977 


1876,143 

Amount  due  to  banks  and  bankers  (items  14-15,  Cr.) $874,055 

Deduct  amounts  due  from  same  (items  8-9,  Dr.) 71,7.38       802,317 


Total  amount  reqiriug  reserve $1,678,460 

5  per  cent.  Redemption  Fund  (item  22,  Dr.),  $11,250,  protects  four  times 

its  own  amount 45,000 


Remainder  requiring  reserve $1,633,460 


25  per  cent,  of  remainder  is 408,365 


One-half  of  which  may  be  with  reserve  agents $204,183 

There  was  with  reserve  agents  (item  7,  Dr.) 186,757 


Deficiency  with  reserve  agents $17,426 

One-half  must  be  in  bank $204,183 

There  was  in  bank — Specie  (item  19,  Dr.) $175,558 

Legal-tender  notes  (item  20,  Dr.).    20,050    195,608 


Deficiency  in  bank 8,575 


Total  deficiency »t4.^.♦♦»♦^ $26,001 


478 


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LAWFUL  -  MOXEY    RESERVE    OF    i!fA.TIOyAL    BAXKS.  479 

The  next  balaxice  sheet  given  is  that  of  a  bank  in  a  reserve  city 
(see  Report  No.  3,  page  480)  having  an  amount  with  reserve  agents 
greater  than  one-half  of  the  total  reserve  required,  the  home  reserve 
being  at  the  same  time  deficient.  The  object  in  this  instance  is  to  use 
as  much  of  the  balance  with  reserve  agents  as  can  be  legally  counted 
as  reserve,  and  at  the  same  time  employ  the  excess,  which  cannot  be 
counted  as  reserve,  to  offset  and  reduce  bank  deposits. 

KEPOKT  NO.    3. 

It  can  be  seen  at  a  glance  that  this  bank  has  amounts  due  to 
banks  mucli  greater  than  the  amoimts  due  from  banks.  A  preliminary 
calculation  will  show  that  one-half  of  the  reserve  required  on 
deposits  is  much  less  than  the  amount  due  from  reserve  agents.  Thus 
roughly  there  are  about  §1,400,000  of  deposits  (items  6,  7,  8,  9,  11,  12, 
14,  15,  Cr.)  after  deducting  due  from  banks  and  Clearing-House 
exchanges  (items  8,  9  and  16,  Dr.).  One-half  of  25  per  cent,  of  this  sum 
(§175, 000)  is  all  that  can  be  counted  as  reserve  with  reserve  agents, 
with  which  the  bank  has  $210,000  (item  7,  Dr.)  or  an  excess  of  about 
§35,000.  It  can  also  be  seen  at  a  glance  that  this  excess  is  not  sufiB.- 
cient  to  offset  the  excess  due  to  banks  (items  14  and  15,  Cr.)  over  amount 
due  from  banks  (items  8  and  9,  Dr.).  It  is  under  such  circumstances 
that  what  is  known  as  the  tw^o-sevenths  rule  applies.  In  order  to 
understand  the  necessity  for  and  application  of  this  rule,  as  well  as 
the  principles  on  which  it  is  based,  it  may  be  prefaced  that  it  is  a  short 
method  of  arriving  at  true  reserve  which  can  only  otherwise  be  deter- 
mined by  a  long  and  tedious  calculation.  In  order  to  easier  understand 
the  rule  mentioned  this  longer  method  will  first  be  given.  The  report 
shows  the  following  items  of  deposits,  etc. : 

Dividends  unpaid  (item  6,  Cr.) $80 

Deposits  (item  7,  Cr.) 1,114,081 

U.  S.  Deposits  (item  12,  Cr.) 75,000 

§1,189,161 

Deduct  exchanges  (item  16,  Dr.) 869,220 

Deduct  bills  of  National  banlis  (item  17,  Dr.) 3,000         72,220 

Sl,116,941 

The  Five  per  cent.  Fund  (811,250,  item  22,  Dr.),  protects  of  above 

f oitr  times  its  own  amount 45,000 

Leaving §1,071,941 

Due  to  banks  and  bankers  (items  14-15,  Cr.) $254,898 

Deduct  due  from  same  (items  8-9,  Dr.) 63,589       191,309 

Deposits  requiring  reserve $1,263,250 

Thus,  after  making  deductions  and  allowing  for  5  per  cent,  fund 
there  are  still  §1,263,250  deposits  for  which  reserve  must  be  held,  of 
which  §191,309  are  bank  deposits  not  covered  or  offset  by  amounts  due 
from  banks.  Twenty-five  per  cent.,  or  one-fourth  of  §1,263,250,  is  the 
total  required  reserve.  One-half  of  the  total  reserve,  equal  to  one- 
eighth  of  §1,263,250,  can  be  counted  as  available  for  reserve  in  the 
hands  of  reserve  agents.     The  remaining  one-eighth  must  be  in  bank. 


480 


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LAWFUL, -MOXEY    RESERVE    OP    NATIONAL    BANKS.  481 

One-eighth  of  $1,263,250  is  §157, 9U6,  and  so  much  therefore  of  the  sum 
in  reserve  agents'  hands  may  now  be  assumed  to  be  available  for  reserve. 
The  bank  has,  however,  with  reserve  agents  §210,672  (item  7,  Dr  ), 
or  §52,766  more  than  can  be  counted  as  reserve.  This  excess  may  now 
be  treated  as  simply  due  from  banks,  and  deducted  from  amounts  due 
to  banks  so  long  as  such  amounts  exist  to  be  offset.  Making  tlie 
deduction,  the  deposits  requiring  reserve  are  reduced  from  §1,263,250  to 
§1,210,484.  Anotiier  diflBculty  now  arises.  It  has  been  seen  that  a  sum 
in  the  hands  of  reserve  agents  equal  to  one-eighth  of  the  deposits  can 
be  counted  as  reserve.  By  the  first  assumption  the  deposits  were  placed 
at  §1,263,250  and  the  one-eighth  at  §157,906.  But  the  deposits  have 
been  reduced  to  §1,210,484,  and  the  one-eighth  available  with  reserve 
agents  must  consequently  be  reduced  to  §151,311.  A  further  excess  of 
§6,595  thus  appears,  which  must  also  be  deducted  from  deposits,  reduc- 
ing them  still  further  and  also  reducing  the  amount  with  reserve  agents 
which  can  be  counted  as  available  for  reserve,  thus  leaving  a  still 
further  excess  to  be  again  deducted,  etc.  After  repeating  this  process 
several  times  a  point  will  at  length  be  reached  wh'en  no  further  deduc- 
tion is  necessary.  In  this  instance  these  repeated  excesses  and  deduc- 
tions are  practically  as  follows.  If  accurately  carried  out  without 
omitting  fractions  each  excess  would  be  just  one  eighth  of  preceding  one. 

1st  excess .?52,766 

2(1  excess 6,595 

3d  excess 825 

4th  excess 103 

5th  excess 13 

6th  excess 2 

Total  amount  to  deduct S60,304 

The  deposits  were $1,263,250 

Deduct 60,304 

Leaving  net  deposits  requiring  reserve $1,202,946 

Twenty-five  per  cent,  of  these  deposits  is $300,736 

which  is  total  reserve  required. 

One-half  of  the  amount  may  be  with  reserve  agent 150,368 

There  was  with  reserve  agents  (item  7,  Dr.) $210,672 

Of  which  we  have  used  as  deduction 60,304 

Leaving  the  required $150,368 

One-half  of  the  total  reserve  must  be  in  bank $150,368 

The  bank  held— Specie  (item  19,  Dr.) $112,579 

Legal-tender  notes  (item  20,  Dr.) 6,921 

U.  8.  Certificates  for  L.  T.  notes  (item  21,  Dr.)  5,000  $124,500 

Deficiency  in  reserve  in  bank $25,868 

In  order  to  avoid  this  long  and  tedious  process  the  two-sevenths  rule 
has  been  invented. 

It  has  been  seen  that  the  §1,263,250  of  deposits  which  formed  the 
basis  of  the   preceding  computation   contained  a   certain    unknown 


482  PRACTICAL    BAJTKING, 

amount  ■u-hieh  was  entitled  to  be  offset  by  the  excess  with  reserve 
agents.  The  amount  so  entitled  to  be  offset  was  exactly  the  same  as 
the  excess  with  reserve  agents.  Calling  this  unknown  amount  X  and 
it  appearstliat  the  amount  $1,263,250  equals  eight-eighths  of  net  deposits 
plus  X,  and  also  that  the  amount  with  reserve  agents,  viz. :  8210,672, 
equals  one-eighth  of  net  deposits  plus  X;  (for  if  X,  not  entitled  to 
coinit  as  reserve,  is  taken  away,  there  is  left  just  what  is  entitled  to 
count  as  reserve,  viz  :  one  half  of  25  per  cent,  of,  or  one-eighth  of 
net  deposits.)  Now,  if  from  81.263,250  is  deducted  §210,672,  the 
remainder,  $1,055,578,  equals  seven  eighths  of  the  net  deposits,  for  one- 
eighth  plus  X  has  been  taken  from  eight-eighths  plus  X,  leaving 
seven-eighths.  Two-sevenths  of  seven-eighths  of  the  net  deposits  is 
the  same  as  25  per  cent,  of  the  net  deposits.  Hence  the  two- 
sevenths  rule : 

Rule. — Alter  making  all  the  usual  deductions,  from  the  remaining  deposits  deduct 
the  whole  amount  in  the  hands  of  reserve  agents ;  two-sevenths  of  the  remainder 
will  be  the  total  reserve,  and  one-seventh  the  home  reserve  requked. 

By  this  rule  the  computation  of  the  reserve  on  bank  statement 
previously  given  would  be  as  follows : 

Dividends  unpaid  (item  6,  Cr.) 880 

Deposits  (item  7,  Cr.) 1,114,081 

U.  S.  deposits  (item  12,  Cr.) 75,000 

§1,189,161 

Deduct  exchanges §69,220 

Deduct  bills  of  Natioral  banks 3,000         72,220 

$1,116,941 

The  Five  per  cent.  Fund  $11,250,  (item  22,  Dr.),  protects  four  times 

its  own  amount 45,000 

Leaving §1,071,941 

Due  to  banks  and  bankers  (items  14-15,  Cr.) $254,898 

Due  from  banks  and  bauker.s  (items  8-9,  Dr.) 63,589       191,309 

81,263,250 
Deduct  amount  with  reserve  agents  (item  7,  Dr.) 210,672 

Remainder  $1,052,578 

Two-sevenths  of  remainder  equal  total  reserve  required $300,736 

One-half  of  which,  $150,368,  is  protected  by  same  amount  with  reserve  agents. 

One-half  is  home  reserve  required $150,368 

The  bank  had  in  its  vaults: 

Specie  (item  19,  Dr) $112,579 

Legal-tender  notes  (item  20,  Dr.) 6,921 

United  States  Certificates  of  Deposit  for  Legal-tender 

notes  (item  21,  Dr.) 5,000       124,500 

Deficiency  in  home  reserve §25,868 

The  same  result  is  thus  obtained  by  both  methods,  but  the  two- 
sevenths  rule  does  away  with  mucli  labor.     If  the  excess  with  reserve 


LAWFUL -MONEY    RESERVE    OF    KATIOXAL    BA^■KS.  483 

ap-ents  had  not  been  thus  allowed  the  deficiency  would  have  been 
$33,406. 

When  it  is  found  that  the  excess  with  reserve  agents  and  the 
amounts  due  from  banks  and  bankers  together  equal  or  exceed  the 
amounts  due  to  banks  and  bankers  it  becomes  necessary  simply  to 
throw  out  bank  deposits  altogether  and  proceed  as  if  there  were  none. 
The  following  interesting  report  (see  Report  No.  4  on  page  484)  is  a 
very  intelligent  example  of  this  : 

REPORT  NO.  4. 

A  rough  estimate  will  show  at  once  that  there  are  about  §2, 500, 000 
of  deposits  after  deducting  exchanges  and  bills  of  National  banks,  and 
that  one-fourth,  or  twenty-five  per  cent,  of  tliis  is  $625,000,  one-half  of 
which  is  $312,500. 

It  will  also  readily  be  seen  that  there  is  at  least  $100,000  excess  with 
reserve  agents  and  $150,000  due  from  banks  (items  8  and  9,  Dr.)  which, 
together,  much  more  than  offset  the  amounts  (items  14  and  15,  Cr. )  due 
to  banks.  This  excess  due  from  banks  cannot  be  offset  against  any 
other  class  of  deposits,  and  is  therefore  useless  to  the  bank  for  any 
purpose  of  reserve.  The  amounts  due  to  banks  having  been  wiped  out 
by  offset,  the  computation  can  be  reckoned  as  follows : 

Dindends  unpaid  (item  6,  Cr.) $405 

IndiTOlual  deposits  (item  7,  Cr.) 2,572,469 

Demand  Certificates  of  deposit  (item  8,  Cr.) 2,728 

Certified  cliecks  (item  10,  Cr.) 4,859 

•  $2,580,461 

Deduct  exchanges  (item  16,  Dr.) $35,301 

Deduct  bills  of  National  banks  (item  17,  Dr. ) 30,305 

$65,6C6 

Deposits  requiring  reserve $2,514,855 

Redemption  Fund  (item  22,  Dr.),  $13,497  50,  will  protect  four  t  mes  its 

amount 53,990 

Remainder $2,460,865 

Twenty-five  per  cent,  of  remainder  is  required  reserve 615,216 

One-half  of  required  reserve  is  $307,608,  and  is  protected  by  an  equal 
amount  in  hands  of  reserve  agents  (item  7,  Dr.) 

One-half  of  required  reserve  must  be  in  bank 307,608 

Bank  held— Specie  (item  19,  Dr.) $85,200 

Legal-tender  notes  (item  20,  Dr.) 15,000 

U.  S.  Certificates  for  Legal-tender  notes  (item 

21,  Dr.) ,.    210,000         310,200 

Excess  in  home  reserve $2,592 

The  previous  deficiencies,  when  existing,  have  been  in  that  portion 
of  the  reserve  required  to  be  kept  in  bank. 

The  following  report  (see  Report  No.  5  on  page  485)  shows  a  condition 
of  things  the  reverse  of  this,  where  the  largest  portion  of  the  reserve  is 
Ml  bank  and  the  deficiency  is  in  that  portion  which  may  be  kept  with 
reserve  agents.     It  has  been  seen  that  no  amount  in  the  hands  of 


484 


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LAWFUL -MONEY    KESERVE    OP    NATIONAL    BANKS. 


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486  PRACTICAIi    BAJTKIXG. 

reserve  agents   eau   directly  make   up  for  a  deficiency  in  the  home 
reserve. 

An  excess  in  home  reserve  can,  on  the  contrary,  always  count,  since 
if  a  hank  sees  fit,  it  can  keep  all  its  reserve  in  its  own  vaults. 

REl'OK  T  NO.  Of 

The  following  is  the  computation  for  the  preceding  report : 

Individual  deposits  (item  7,  Cr.) .?1, 689,939 

Demand  certificates  of  deposit  (item  8,  Cr.) 31,445 

Cashier's  checks  (item  11,  Cr.) i;34,l(59' 

$1,85.5,553 

Deduct  exchanpjes  (item  10,  Dr.) .$280,859 

'        Deduct  bills  of  National  banks  (item  17,  Dr.) 20,203        301,062 

.$1,554,491 

Amounts  due  to  banks  (items  14-15,  Cr.) 8240,108 

Deduct  due  from  banks  (items  8-9,  Dr.) 237,500  2,668 

Total  deposits $1  ,.557,159 

Five  per  cent.  Redemption  Fund  (item  22,  Dr.),  .$20,095,  protects  four 

times  its  own  amount 107,980 

Remainder $1,449,179 

25  per  cent  of  remainder  is  total  reserve  required 362,294 

One-half  of  which  must  be  in  bank 181,147 

There  was  in  bank — Specie  (item  19,  Dr.) $57,838 

Legal-tender  notes  (item  20,  Dr.) 162,882  220,720 

Excess  in  bank 39,573 

One-half  of  total  reserve  may  be  with  reserve  agents $181,147 

There  was  with  reserve  agents  (item  7,  Dr.) 150,883 

Deficiency  with  reserve  agents $30,264 

Offset  by  excess  at  home  as  above 39,573 

Net  aggi-egate  excess  of  reserve sO,:U)9 

RESERVE    OF   BANKS    OUTSIDE    OP   RESERVE    CITIES,    OR   FIFTEEN 
PER   CENT.   BANKS. 

The  five  computations  that  have  heretofore  been  given  in  this 
chapter  have  been  based  on  statements  of  banks  located  in  reserve 
cities  where  the  reserve  required  to  be  kept  is  25  per  cent,  of  the  net 
deposits. 

The  banks  located  outside  the  reserve  cities  are  required,  as  has 
already  been  stated  in  tliis  summary,  to  keep  a  reserve  of  15  per  cent, 
only  of  net  deposits,  three-fifths  in  amount  of  which,  at  most,  may  be 
kept  with  reserve  agents,  and  two-fifths  of  which,  at  least,  must  be 
kept  in  Jmnk, 

The  computations  of  the  reserves  of  the  15  per  cent,  banks  are  the 
same  in  principle,  but  the  proportions  are  changed  in  accordance  with 
the  different  requirements  of  law. 

The  following  (see  Report  No.  6  on  page  487)  is  the  report  of  a  15 


LAWFUL -MONEY   RESERVE    OF    NATION^Ui    BA^'KS. 


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488  PKACTICAL    BAXKING. 

per  cent,  bank,  whieh  shows  a  deficiency  both  in  liome  reserve  and  in 
that  with  reserve  agents. 

REPORT  NO.  6. 

The  computation  of  reserve  shown  by  this  statement  is  as  follows : 

Dividends  unpaid  (item  6,  Cr.) ' SOOO 

Deposits,  individual  (item  7,  Cr.) 262,251 

Demand  certificates  of  deposit  (item  8,  Cr.) 4,0G5 

Cashier's  dieclvs  (item  11,  Cr.) 583 

United  States  deposits  (item  12,  Cr.) 65,519 

$332,418 

Deduct  exchanges  (item  16,  Dr.) $4,799 

Deduct  bills  of  National  banks  (item  17,  Dr.) 1,372        6,171 

$326,247 

Five  per  cent.  Redemption  Fund  (item  22,  Dr.),  $12,375,  protects  six 

and  two-third  times  its  own  amount 82,500 

Remainder $243,747 

Amounts  due  to  banks  (items  14-15,  Cr.) $164,605 

Amounts  due  from  banks  (items  8-9,  Dr.) 15,385  $149,220 

Total  deposits  requiring  reserve $392,967 

Fifteen  per  cent,  of  above  is  total  reserve  required 58,945 

Three-fifths  of  foregoing  amount  may  be  with  reserve  agents. .    $35,367 
The  bank  had  with  reserve  agents  (item  7,  Dr.) 31,027 

Deficiency  with  reserve  agents $4,340 

Two-flfths  at  least  must  be  in  bank $23,578 

There  was  in  bank— Specie  (item  19,  Dr.) $20,500 

Legal-tender  notes  (item  20,  Dr.). . .     2,000      22,500 

Deficiency  in  home  reserve 1,078 

Total  deficiency $5,418 

The  next  statement  (see  Report  No.  7  on  page  489)  shows,  in  the  ease 
of  a  15  per  cent,  bank,  the  method  of  utilizing  the  excess  in  the  hands 
of  reserve  agents  as  an  ofEset  against  amounts  due  to  banks.  The 
method  of  doing  this  with  banks  in  reserve  cities  has  already  been 
shown  under  the  head  of  the  two-sevenths  rule.  With  15  per  cent, 
banks  the  principle  is  the  same,  but  the  legal  proportions  of  reserve 
with  reserve  agents  and  in  bank  being  different,  a  different  rule  is 
required. 

Rule.— After  all  other  deductions  have  been  made,  the  whole  amount  with  reserve 
agents  is  to  bo  deducted,  and  lifteen  ninety-firsts  of  the  remainder  (instead  of  two- 
sevenths,  as  in  the  case  of  25  per  cent,  banks),  is  the  total  reserve  requu'ed. 

REPORT  NO.  7. 

In  this  report  a  rough  estimate  will  show  that  the  amounts  due 
to  banks  exceed  those  due  from  the  same  by  about  ^100,000.  It 
can  also  be  seen  at  once  that  the  total  deposits  after  deductions  are 
made  are  about  $760,000,  15  per  cent,  of  which,  being  the  total  reserve 
required,  is  about  §114,000,  and  that  three-fifths  of  the  latter  sum  is 
about  869,000.     From  this  it  appears  that  there  being  $128,063  with 


LAWFUL -MONET   RESERVE    OP   NATIONAL   BANKS. 


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490  PRACTICAL    BAXKING. 

reserve  agents,  there  is  at  first  sight  an  excess  with  these  agents  of 
about  5550,000,  Avhieh  can  be  deducted  from  the  amount  due  to  banks. 
To  do  this  in  the  ordinary  waywould  require  repeated  calculations  and 
deductions,  as  has  already  been  seen  when  explaining  the  two-sevenths 
rule.  Avoiding  this,  the  result  can  be  obtained  at  once  by  following 
the  rule  last  given. 

Individual  deposits  (item  7,  Cr.) >:()02,5S0 

Demand  certificates  of  deposit  (item  8,  Cr.) 1(5,633  $619,212 

Deduct  exchanges 15,327 

Deduct  bills  of  National  baiilis 4,009       19,336 

8599,876 
The   five   per  cent.  Redemption  Fund  (§4,499.40,  item  22,  Dr.),  will 

protect  6  and  two-thirds  times  its  own  amount 29,996 

Leaving §569,880 

Due  to  banks  and  bankers  (items  14-15,  Cr.) .§207,833 

Less  due  from  banks  and  bankers  (items  8-9,  Dr.) 39,502     168,331 

§738,211  ^ 
Deduct  full  amount  in  hands  of  reserve  agents  (item  7,  Dr.) 128,063 

Eemainder §610,148 

Fif teen-ninety-firsts  of  remainder  is  the  required  reserve §100,570 

Three-fifths  of  required  reserve  may  be  with  reserve  agents 60,342 

(and  is  protected  by  equal  amount  in  hands  of  such  agents.)  

Two-fifths  of  required  reserve,  at  least,  must  be  in  bank §40,228 

The  bank  held— Specie  (item  19,  Dr.) §6,243 

Legal-tender  notes  (item  20,  Dr.) 17,000       23,243 

Deficiency  in  home  reserve , §16,985 

This  method  for  15  per  cent,  banks  gives,  as  does  the  two-sevenths 
rule  for  25  per  cent,  banks,  the  largest  possible  deduction  for  bank 
balances  and  makes  the  required  reserve  as  small  as  possible. 

As  in  the  case  of  the  25  per  cent,  banks,  so  with  the  15  per  cent, 
banks,  when  it  is  evident  that  amounts  due  from  banks,  together  with 
the  excess  with  reserve  agents,  are  equal  to  or  exceed  the  amounts  due 
to  banks,  the  latter  amounts  are  omitted  from  the  comiputation,  and 
any  excess  due/V'om  banks  or  reserve  agents  ceases  to  be  of  any  avail  to 
reduce  the  required  reserve.     The  following  statement  illustrates  this: 

In  demonstrating  the  two-sevenths  rule  it  was  assumed  tliat  deposits 
were  eight-eighths  of  net  deposits  plus  X,  and  that  fund  with  reserve 
agents  was  one-eighth  of  net  deposits  plus  X,  and  by  taking  one  from  the 
other,  seven-eighths  of  net  deposits  were  left.  So,  with  the  fifteen  ninety- 
firsts  rule  it  is  found  that  gross  deposits  are  one  hundred  one-hundredths 
of  net  deposits  plus  X,  and  that  amount  with  reserve  agents  is  three-fifths 
of  fifteen  one-hundredths,  or  nine  one-hundredths  of  net  deposits  plus  X. 
Deducting  one  from  the  other  leaves  ninety-one  one-hundredths  of  net 
deposits;  and  fifteen  ninety-firsts  of  ninety-one  one-hundredths  is  the 
same  as  15  per  cent,  of  one-hundred  one-hiindredths  of  tlie  net  deposits. 


LAWFUL -MONEY   RESERVE      OF    NATIONAL   BANKS. 


491 


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493  PRACTICAL   BA^'KI^'G. 

REPORT  NO.  S. 

The  deposits  rouf^hly  estimated  are  about  8187,000,  three-fifths  of 
15  per  cent,  of  whicli,  or  9  per  cent.,  is  §16,830,  showing  that  in  the 
^4,509  with  reserve  agents  (item  7,  Dr.),  there  is  an  excess  of  about 
§28,000,  wiiich  completely  offsets  the  small  balance  due  to  banks.  The 
computation  will  then  be  as  follows : 

Dividends  unpaid $64 

Individual  deposits  (item  7,  Cr.) 170,004 

Demand  certificates  of  deposit  (item  8,  Cr.) 10,736  §181,401 

Deduct  checks  on  banks  in  same  town .$1,373 

Deduct  bills  of  National  banks 2,9.55      S4,328 

§177,076 
The  five  per  cent.  Redemption  Fund  will  protect  6  and  two-thirds  its 

own  amount 25,000 

Remainder 8152,076 

15  per  cent,  of  remainder  is  required  reserve 22,811 

Three-fifths  of  required  reserve  may  be  with  reserve  agent,  $13,687,  and 
is  protected  by  equal  amount  in  hands  of  such  agent. 

At  least  two-fifths  of  required  reserve  must  be  in  bank §9,125 

There  was  in  bank — Specie  (item  19,  Dr.) §1,471 

Legal-tender  notes  (item  20,  Dr.) 5,000        6,471 

Deficiency  in  home  reserve §2,654 

REPORT  NO.  9. 

The  next  statement  (See  No.  9  on  page  493)  is  that  of  a  15  per  cent, 
banii  with  the  largest  part  of  the  reserve  at  home,  not  having  with 
reserve  agents  the  full  three-fifths  of  the  total  reserve  which  it  is  legally 
permitted  to  keep  there.  There  is  no  deficiency,  however,  as  the  com- 
putation hereafter  given  will  show.  This  statement  also  shows  bills 
payable,  upon  which,  as  has  been  said,  a  reserve  is  required. 

Dividends  unpaid  (item  0,  Cr.) §460 

Individual  deposits  (item  7,  Cr.) 191,359 

Cashier's  checks  (item  11,  Cr.) 2,643 

Bills  payable  (item  17,  Cr.) 20,000 

§214,462 

Deduct  bills  of  National  banks 1,820 

$313,142 
Five  per  cent.  Redemption  Fund  will  protect  6  and  two-thirds  its  amount,       60,000 

Remaipder §153,142 

No  bank  deposits.  ^^^^^^^ 

15  per  cent,  of  above  is  total  reserve  required 22,971 

Three-fifths  of  total  reserve  may  be  with  reserve  agents §13,783 

There  was  with  reserve  agents  (item  7,  Dr.) 1(),1?'3 

Deficiency  with  agents 3,610 

Two-fifths  of  total  reserve,  at  least,  must  be  in  bank $9,188 

There  was  in  bank — Specie  (item  19,  Dr.) €;l,784 

Legal-tender  notes  (item  20,  Dr.) 12,690       14,474 

Excess  at  home §5,286 

Deficiency  with  reserve  agents 3,610 

Excess  in  total  reserve $1,676 


LAWFUL -MONEY   RESERVE    0:7    NATIONAL   BANKS. 


493 


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49^  PRACTIC^VL    BAXKIXG. 

The  examples  given  include  all  the  cases  that  can  arise  either  in  25 
per  cent,  or  15  per  cent,  banks.  The  figures  will  vary,  but  if  the  principles 
laid  down  are  followed  every  possible  case  can  readily  be  worked  out. 

AVERAGE  RESERVE. 
The  average  reserve  for  any  given  period  may  be  obtained  by  com- 
puting by  the  methods  heretofore  shown,  the  net  deposits  requiring 
reserve  for  each  day  in  that  period,  and  adding  the  results  together  for 
a  divisor.  In  the  same  way  the  reserves  held  on  the  same  days 
should  be  added  together  for  a  dividend.  The  quotient  will  be  the 
percentage  of  average  reserve  for  the  period. 

FIFTEEN    PER   CENT.  BANKS   IN   RESERVE    CITIES. 

There  are  two  or  three  instances  of  banks  now  located  in  reserve 
cities  which  are  only  required  to  keep  a  total  reserve  of  15  per  cent. 
Tills  anomaly  arises  from  the  fact  that  when  these  banks  were  organ- 
ized they  were  situated  in  a  suburb  which  has  since  been  absoi'bed  by 
the  growing  city.  Thus  Birmingham  was  taken  into  Pittsburgh,  Pa. 
The  National  bank  in  Birmingham,  organized  there  before  that  town 
became  a  part  of  Pittsburgh,  still  retains,  under  a  decision  of  the 
Attorney-General  of  the  United  States,  the  exact  status  it  had  at 
oi'ganization,  and  will  retain  it  until  its  charter  expires.  Among  other 
rights  retained  is  that  of  keeping  a  reserve  of  15  per  cent.  only.  In  the 
same  situation  are  banks  in  Dorchester,  Roxbury  and  Charlestown,  now 
parts  of  Boston,  Mass. ,  and  in  Georgetown,  now  part  of  Washington,  D.  C. 

APPROVED  RESERVE   AGENTS. 

Any  bank  situated  outside  of  the  reserve  cities  can  select  any 
National  bank  within  any  of  such  cities  as  a  depositary  for  its  funds, 
and  such  funds  so  deposited  are,  when  the  selection  is  approved  by  the 
Comptroller,  allowed  to  be  counted  as  a  part  of  the  required  reserve  of 
the  depositing  bank.  In  the  same  way  banks  in  reserve  cities  can 
select  for  approval  banks  in  New  York,  Chicago  or  St.  Louis.  The 
bank  making  the  selection  writes  to  the  Comptroller  of  the  Currency, 
and  asks  his  approval  of  the  chosen  bank.  The  approval  is  usually 
given,  and  the  necessary  entries  made  in  the  books  of  the  Comptroller's 
ofScJe.  The  bank  is  advised  that  the  selection  is  approved,  and 
thenceforth  all  balances  due  from  this  approved  bank  are  counted  as 
available  for  reserve  under  the  law. 

Richmond  and  Charleston,  although  named  in  Section  5192  among 

the   cities,    wherein   15    per   cent,    banks    are   permitted  to    deposit 

three-fifths  of  their  reserves,  are  not  named  in  Section  5191,  among  the 

cities,  wherein  banks  are  required  to  keep  the  larger  reserve  of  25  per 

cent. — this  larger  reserve  being  principally  required  because  of   the 

greater    responsibility   incurred    by  receiving  the    deposit    of    bank 

reserves.     For  this  reason  no  banks  located  in  Richmond  or  Charleston 

have  ever  been  approved  as  reserve  agents  by  the  Comptroller. 

Note.— A /ac-.si/(u7e  of  the  Report  Blauk  sent  to  National  banks  is  shown  else- 
where in  this  volume.    See  Appendix. 


A   CHAPTER   OX   SIGNATURES. 


495 


CHAPTER    XXX. 

*A  CHAPTER  ON  SIGNATURES. 

In  the  regular  course  of  business  bankers  sometimes  come  across 
very  queer  signatm-es.  The  question  is  sometimes  asked — "What's  in 
a  name?"  and,  judging  from  tlie  way  some  bank  officials  write  their 
names  there  is  a  good  deal  in  it  in  the  way  of  bother  before  they  can 
be  made  out.  For  instance,  here  is  the  way  the  Cashier  of  a  National 
bank  in  Kansas  signs : 


His  name  is  W.  P.  Hazen.  Several  years  ago  a  premium  of  a  year's 
subscription  to  Rhodes'  Journal  of  Banking  was  offered  to  any  one 
who  would  read  the  signature  and  out  of  several  hundred  guesses 
received  not  more  than  twenty-five  were  correct. 

The  Pacific  slope  contributes  the  following  remarkable  signature 
which  is  that  of  C.  W.  Bush,  Cashier  of  a  California  bank : 


'The  signatures  in  this  chapter  are  all  photographed  from  the  originals. 


496 


PRACTICAL    BAXKrXG. 


It  hardly  seems  possible  that  the  followmg  signature  is  that  of 
Carmen  Parse,  Cashier  of  a  bank  in  New  Jersey,  but  that  is  the  way 
he  writes  it : 


A  well-known  National  bank  Cashier  in  Michigan  writes  liis  name 
as  below,  and  calls  it  E.  Newell : 


Below  is  the  signature  of  Hugh  Harbison,  Treasurer  of  a  manu- 
facturing company  in  Connecticut.  It  ranks  high  as  a  curiosity  in 
penmanship.     Many  a  bank  officer  has  puzzled  his  weary  brain  over  it : 


A.    CHAPTER    ON    SIGNATURES. 


497 


The  following  specimen  is  given  not  so  much  for  illegibility 
(although  the  signature  would  be  puzzling  to  those  not  familiar  with  it) 
as  it  is  to  show  another  style  of  penraansliip  adopted  by  some  bankers. 
In  the  original  the  form  below  fills  the  entire  page  of  a  letter  sheet 
(reduced  to  tliis  size  by  photo-engraving  process)  and  was  one  used  by 
the  writer  in  remitting  for  collections.  The  signature  is  that  of  Jas. 
V.  D.  Westfall,  formerly  a  private  banker  in  Western  New  York : 


This  is  the  way  F.  S.  Watts,  Teller  of  an  Iowa  bank  makes  his 
signature.     It  is  characteristic  yet  fairly  legible: 


498 


PRACTICAIi   BA>'KIXG. 


When  it  comes  to  constructing  a  very  unique  signature,  F.  C.  Miller, 
the  Cashier  of  a  Kansas  bank,  does  it  in  this  remarkable  style : 


Below  is  the  signature  of  John  Mohr,  Jr. ,  Cashier  of  a  bank  in  Indiana ; 


Here  is  the  signature  of  R.  J.  B.  Crombie,  Manager  of  a  Canadian 
bank : 


A    CHAPTEU    OX    SIGXATURKS. 


499 


The  fuUowing  peculiar  composition  stands  for  the  name  of  Lloyd 
Bowers,  Cashier  of  an  Arkansas  National  bank : 


No  one  could  possibly  tell  whether  the  following  was  a  man's  name 
or  a  Chinese  puzzle,  but  it  is  the  way  H.  G.  Nolton,  formerly  Vice- 
President  of  a  New  York  State  bank,  signed  his  letters: 


Tom  Randolph,  President  of  a  Texas  National  bank,  puts  liis  name 
on  the  bottom  of  bank  bills  in  this  style: 


It  is  very  doubtful  if  the  average  bank  clerk  could  make  the  fol- 
lowing cob-web  read  W.  D.  Mussenden,  but  that  is  how  the  Cashier  of 
a  down-east  bank  writes  it : 


^^^  "^ 


^ 


500 


PRACTICAIi   BAXKIXG. 


By  way  of  contrast  the  signature  of  John  Johnston,  Cashier  of  the 
Wisconsin  Marine  &  Fire  Insurance  Co.  Bank  of  Milwaukee,  is  given. 
As  an  example  of  a  strong,  legible  signature,  it  is  an  excellent  model. 
Experts  claim  that  a  plain  signature  baffles  the  forger  more  than  one 
difficult  to  decipher.  The  signature  is  that  of  Mr.  Johnston  when  he 
was  Assistant  Cashier.  Smce  the  death  of  Alexander  MitcheU,  former 
President,  he  has  been  the  Cashier: 


TBJE  XiTD. 


APPENDIX. 

1.  Form  of  Skeleton  Ledger;  or,  Depositors'  Daily  Balance  Book. 

2.  Fac-simile  of  blank  on  which  National  Banks  report  to  the  Comptroller 

of  the  Currency. 


MODEL    OF    THE 

Ledger";  or  Depositors'  Dai 

For  Description,  see  Page  57 


wa^fi,      /<^^e. 


a//.  4. 


a^M.  s 


m^am//,  j/an  d. 


o 


Checks  in  Detail.        I    Total  Checks. 


Anderson,  Peter. 
Adams,  Eve. 


5  871 
920 


843 
194 


Total  Credits,     ii  Credits  in  Detail. 


||  827.89 

962  >29  i  m      s.'< 


Checks  in  Detail.        i       Total  Checks.    |       Total  Credits. 


Henderson,  Chas. 
Robbins,  Winslow. 


18  621   23 

300 


Storrow,  A.  D. 
Washington,  C.  E. 


5  000 

10   891    25 


8    721  dis.        8.721 

37.'J 

475  loOJ.  B.  jiCo. 


5  000 

I;  BOO      J.  V. 

5    353    60       7    500  1  '.O™ 


Total  Net  Deposits.  41  003  73 


Capital  Stock. 

Notes  Discounted. 
Discount. 
Profit  and  Loss. 
Expense. 


143  721   87 
2  721  92 


Cash.     

Liabilities. 
Resources. 


149   725  65 

149    725    65 


11   441   45     19  448   29 


5   600 
279 


5  980 
2  525 


27  342  23 
125 


i  7,000        ''    7  538'  1  018' 

I  'II 

572  88       1    500 


i'md  10  000 


Checks  in  Detail.      '        Total  Checks. 


539  ;e9 

a  452  50 


17  342  23 
8  341  87 


3  000 
7  337  65 


S  2  450 


147  121;  87 
3  000  92 


e  000  ' 


20  444  45  25  327  29 
jDepo.it.1,    25  327  29  20  444  45 


158  Oil  49 

111 58  Oil  49) 


23  810  88  13  734  87 


23  816  63  26  384  87 


26  384  87  23  816  63 


134  471  87 
3  000  92 
6  000 


14  412  72   9  307  40 


12  529  86 


9  307  40  14  412  72 


L47  935  48 

147  935  48 


Fill  ALL  SCHKDULES.  writing  in  the  v 

SO] 
LOANS  AND  DISCOUNTS. 


®.  U^  „  «t.  s.  a»i» - I 

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3ai.. 


Included  in  the  above  are— 

Vl)Uu>    iuilMmAcd    (wi    onoAiu   WW ..». - tV  - 


Eutor  (ho  aranuii 
caoli  of  these  tl 
itcm»,  or  write  in 
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is  no  amount  to  en 


LOANS  Exceeding  the  Limit  Prescribed  by  Section  5200  of  the  Revised  Statutes,  including  An 
which  Exceed  this  Limit  due  from  State  and  Privats  Banks  and  Bankers. 

«^.  „.„„.„ 

'^"•"oT'.ir-"' 

Name  of  Borrower 

^"'"<,?',r„' 

STOCKS,  SECURITIES,  CLAIMS,  &c. 


iti^iSorJtSlir't.r    .           "'"•  I" "'K™d"°Jli"°'"'  ""'°' 

^ei^sr^L-: 

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BALANCES  DUE  FROM  OR  TO  APPROVED  RESERVE  AGENTS. 
FROM-  TO- 


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CHECKS  AND  OTHER  CASH  ITEMS. 

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AVERAGE  RESERVE  AND  INTEREST. 

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(A. 


pin  ALL  8CUEUULE8,  * 


SCHEDULES. 


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EiCM<mg  the  LJmH  Prucritwd  by  SacUan  5300  or  th«  Rtvliad  Slatutu,  Inctuding  Anaynti 
which  Ztewi  thli  Unit  dua  frsn  Slata  ud  PrivaU  Buikt  and  Bukera. 


STOCKS.  SECUBITIES, 

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lounts 


Srettred : 
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■' 

OTHER  REAL  ESTATE  AND  MORTGAGES  OWNED. 


„.,£;ri^^^^^„. 

•hl*CTSrlid 

prior  lien  OQ 

olrroK'lJ. 

DsU  vb«a  BOqolr«>L 

"dsbUprovlou*]!  cohtreetad." 

— 

- -- 

LOANS  AND  DISCOUNTS,  Secured  by  Mortgages  or  Other  Real  Est&te  Security. 


1      0 


^ 


Do^crlbf  property. 

**ois'Sv.'"' 

prlo.lltn  on 
pfop«rly. 
Iftnr. 

of  property. 

Dftte  wh6D  MTialnM. 

■JS^l^^^iX.:. 



,.... 

~: 





-— ■ - 

INDEX. 


Page. 

Abrasion  of  gold  coin 33 

Absences,  occasional 8 

Absent  endorsement  supplied 251 

Acceptance  and  return 97 

cancelling  acceptance  of  draft. .     87 

collection  of 263 

of  draft  by  attorney 87 

of  incorrectly  addressed  draft. . .     83 

of  time  drafts  by  bank 412 

Accepting  drafts  and  naming  place 

of  payment 85 

Acceptor,  a  question  of  spelling. .  415 
Accidental   destruction   of    bonds 

and  money 156 

Accommodation  paper 140 

signatures 414 

Accounts  of  unknown  persons. . . .  277 

Accuracy  not  assured  in  telegraph- 
ing   212 

Acknowledgements    of     accounts 

current 209 

of  letters  sent 208 

Acknowledging  correctness  of  pass 
books 52 

Additional  force  for  vacation  time.  288 

Administrator,  opening  an  account 

with 438 

stock  transfers  by 186 

Advertising  articles  found 24 

Advice  of  checks  drawn 240 

Age  of  bank  officers 440 

Agency  for    making    city  banks' 

country  collections 106 

or  branch  bank 296 

Agents  at  "Washington 295 

All  right,  when  it  was  all  wrong. .     89 

Alloy  in  gold  coin 30 

Alterations  of  checks 402 

Altered  circulating  notes 40 

Alternate  payees  for  checks 238 


American    Bankers'    Association, 

auxiliary  membership  of 6 

Amusements  and  outside  interests 

823,326,413 

Annual  meeting    of  stockholders 

264,373 

Application  book  and  its  form. . . .  120 
Apprenticeship  system  in  Scotch 

banks 5 

Approval  check-mark  by  Directors  120 

Approved  reserve  agents 494 

Arguments  against  position  in  a 

bank 1 

Arrangement  of  banking  room. . .  340 

Assault  upon  messengers 88 

Assets  and   liabilities  on  balance 

sheet 63 

Assistant — gen'l  asst.  best  place  for 

young  clerk 5 

Association,    American    Banktrs,' 

auxiliary  membership 6 

Associations,  bank  clerks'. . .  .  .325,376 
Assorting  and  filing  paid  checks. .     65 
Attendance  book  of  Bank  of  Eng- 
land        8 

Attorney  for  the  bank 296 

Average  reserve 494 

Averaging  an  account 459 


Balance  sheet,  when  made  up. . . .  61 

daily  use  of 61 

forms  of 62 

Balancing  pass-books  monthly. ...  50 

Bank  examinations 446 

discount  department 450 

general  book-keeper 450 

paying-teller's  department 448 

receiving-teller's  department 449 

third-teller's  department 449 

true  way  to  examine  banks 447 


504 


INDEX. 


Bank,  grammatical  use  of  word. .  415 
use  of  this  title  by  iudividuals. .  413 

Bank — inside  workings  of 44G 

Bank  of  England,  attendance  book      8 

bullion,  its  stock  of 34 

character  of  its  clerks 8 

clerks'  literary  association 326 

vacation  arrangements 290 

lost  or  stolen  notes  of 157,366 

lunch  room 294 

medical  care  of  clerks 378 

need  of  modern  methods  in 284 

new  clerks  and  salary 5 

notes,  their  issue  and  redemption  366 

plan  of  fidelity  insurance 377 

profit  on  circulation 368 

residences  within  the 314 

rule  for  keeping  old  papers 347 

statement  of  condition 374 

system  of  pensions 378,440 

treatment  of  its  employees 377 

Best  bankers  have  passed  through 

lower  offices 1 

Best  position  for  young  clerks  ...      5 
Bills  of  exchange,  different  forms  of  225 

Bill  of  sale  important 138 

Bills,  paying  out  uncounted 17 

(see  Circulating  notes) 

Blank   report   sent    to    banks    by 
Comptroller  — facsimile  — (in 
appendix.) 
Bonds,  accidental  destruction  of. .  155 

giving  personal  bonds 335 

moral  value  of  officers'  bonds. ..  335 
of  indemnityin  stock  transfersl88, 193 

of  suretyship 330 

of  suretyship  when  charter  ex- 
tended   338 

stopping  payment  of 156 

various  forms  of 153 

Book-keeping,  Boston  system  of . .     58 

Book-keeper,  his  duties 57 

Books,  neat  and  good  forms  neces- 
sary      64 

system  in  ordering C5 

Boston  system  of  book-keeping. . .     57 
Boys,  growing  custom  of  taking 

for  new  clerks 4 

Branch  banks 296,445 

Branding  .  counterfeit      National 
bank  notes 45 


Brokers    supplying    banks    with 

paper 119,137 

Bulk  of  gold  in  large  amounts 29 

Bullion  gold  at  Bank  of  England.     34 

gold  bought  and  sold 30,34 

Burning  redeemed  circulation. . . .  203 
Business  hours  in  different  locali- 
ties  290,445 

hours,  the  legal  view 292 

paper,  now  and  formerly 139 

Buying  all  paper  offered 122 

and  selling  paper, 136,137,416 


Calculating  time  on  paper 131 

Canadian  banking 444 

Cancelling  paid  checks, 254 

redeemed  circulating  notes 200 

stock  certificates 180 

Carat  as  a  measure  of  gold 30 

Care  of  banking  rooms 341 

of  collaterals 147 

of  locks  and  keys 343 

of  officers'  bonds 333 

of  old  books  and  papers 346 

of  paper  money 3'J 

of  stock  certificates 181,426 

of  waste  paper 342 

Carelessness  at  Teller's  desk,  anec- 
dote      25 

Cashier,  cares  and  duties  of.  ..161,173 

commissions  offered  to 898 

his  relations  to  the  clerks 163 

his  records  and  books 166 

signature,  importance  of 165 

should  not  have  clerical  duties .  162 
Caution  in  exposing  dividend  list.  177 
Certificate  of  deposit,  in  payment 

of  check 22 

issue  and  payment  of 243 

issued  on  time 898 

protest  of 400 

Certificate  of  stock,  care  of 426 

issue  and  retirement  of 181 

Certification  by  telegraph 217 

can  checkholder  demand 15 

not  done  in  England 372 

of  a  small  check 15 

of  raised  check 27 

of  unindorsed  check 22,253 


INDEX. 


505 


Certification  by  telegraph,  power 

to  certify 15 

prohibited 15 

special  forms  of IG 

Changing  positions  of  clerks 280 

Charging  for  expense  of  small  acct.  39G 

notes  through  Clearing 94 

note  to  makers'  account 93,96 

Charily,  a  bank's  right  to  give..  395 
Charge  tickets  and  journal  entries  .  459 
Check,  after  death  of  drawer. .  .22,234 

assorting  and  care  of 65 

certification  of. .  .15,16,22,27,217,252 

chapter  on 234 

counter-signing 240 

country  checks  charged  through 

Clearing 361 

crossed  cheques  in  England 368 

drawn   against  insufficient  bal- 
ance       14 

drawn  to  alternative  payees 238 

endorsements  on,  responsibility 

for 401 

fraudulent  alteration  of 402 

issue  of  duplicate 241 

improperly  written 239.253 

no  grace  on  checks 235 

not  properly  endorsed 16,237 

or  cheque 415 

payment  of  unindorsed  check. .     23 

payment  of  part  of 14 

receipt  for  payment  of 14 

receiving  check  for  sundry  pay- 
ments      96 

return  of  check  charged  through 

Clearing 35^,360,371 

requiring  qualified  endorsement  253 

stopping  payment  of 253 

through  Clearing,  which   to  re- 
turn  360,371 

used  for  Clearing-House  settle- 
ments    353 

writing  up  on  slips  for  depositors    51 

Cipher,  an  impromptu  form 220 

codes,  care  of 218 

codes,  use  and  value  of 214,217 

Circuitous  routes  for  collections. .  104 
Circular  note  in  place  of  Letter  of 

Credit 233 

Circulating  notes  of  Nat'l  banks.37,196 
do        do    coin  values  of 38 


Circulating  notes  lost  and  destroyed  198 
do        do    redemption  of  37,38, 199 

do        do    series  of 37 

do        do    their  value 37,38 

do        do    of  Great  Britain. . .  307 

do        do    over  issue  of 200 

do            printing  signatures  on  165 
do        do    stolen  unsigned.  .44,198 
Circulation,  burning  after  redemp- 
tion   203 

keeping  it  out 196 

of  Great  Britian,  report  of 367 

record 196 

returns  and  taxes 66 

Civility,  importance  of 305,429 

Clearing-House  and  the  Trust  Com- 
panies    380 

collecting  notes  through 94 

funds  and  payments 37,353 

loans  made  at  Clearing-House. .  355 

management  and  rules 354,358 

paying  country  checks  through .  361 
reports  to,  and  published  returns  362 

responsibilities 357 

settlement  with  defaulting  bank  358 
time  for  returning  check  extend'd  359 

work  described 349 

Cleopatra  and  ancient  gold 29 

Clergymen  as  financiers 436 

Clerks  follow    business  habits  of 

superiors 8 

of  bank  acting  as  notary 112 

present   and  former    modes   of 

obtaining 4 

well    informed    clerk  of   great 

value 6 

Clipped  coins 32 

Coins,  clipped  and  mutilated....  32 
redemption  of  worn  U.  S.  coins  36 
standard  weights  of  U.  S.  coins    35 

test  for  counterfeit  coin 35 

shipment  of,  to  Europe 32,34 

Collateral,  handling  and  care  of. .  147 

notes 134 

receipts  for  delivery  of 148 

responsibility  for 150 

sale  of 135 

time  paper  as  collateral 149 

versus  personal  security 151 

Collecting  interest  on  demand  loans  137 


outj 


I^'DKX. 


108 

79. 


Collecting  interest  on  defaullerb' 

bonds ^-^^ 

through  express  companies 101 

Collection  by  special  messenger 

department 

charges    under    old    and    new 

methods ^^'- 

103 

105 

100 


Covers  for  notes 73,126 

Credit,  and  other  tickets 125 

of  firm  difficult  to  fix 411 

to  ■wrong  account 277 

Crops,   their    influence    on    bank 

loans l4o 

Crossed  cheque  described 368 


contracts 

of  unusual  items 

profits  and  expenses 

trip  for  Suffolk  Bank.   358,388 

Collections,  by  city  banks  in  com- 

bination l^*^ 

filing  and  recording "^^ 

from  unknown  parties 99 

invoice  is  important '  ~' 

made  by  failed  bank 97 

responsibility  for 97 

sent  over  circuitous  routes 104 

Combination  of  banks  for  collec- 

tion  business 1^" 

Commissions  offered  to  bank  officers  397 
Comptroller's  action  when  bank  is 

mismanaged ■^•'^ 

Condition  of  the  bank 61 

publication  of  statement  of .  ..68,374 
Confidence,  a  business  necessity. .  434 

absence  of ^^^ 

Consols,  the  English  securities 374 

Conveniences  in  modern  banking.  281 
Co-operation  of  Cashier  and  clerks  163 

in  Fidelity  Insurance 377 

Copying  and  recording  the  letters  207 

ink  for  printed  forms 207 

Corporation  service,  objections  to.       2 

Corporation,  endorsement  by. . . . .  248 

Correspondence,  in  care  of  Cashier  166 

narrow  limits  of  expression  in. .  204 

promptness  in  handling 204,209 

special  qualities  needed  In 205 

to  be  copied •  •  ^^^ 

Counting  bills  received  and  paid 

out ^  * 

Counterfeit  circulating  notes,  brand- 
ing of 45,387 

detection  of ^^ 

Coupons,  and  interest  warrants. ..  154 

listing  and  collecting 158 

stopping  payment  of l'^6 

Courtesy  must  be  invariable276.304,429 


17 
98 

177 


Danger  in  collecting  for  strangers    99 
Dealers  appreciate  varied  knowl- 
edge in  clerk 86 

Dealing  in  money 406 

Death  among  the  officers 313 

of  check  drawer 22 

Debentures  and  bonds 153 

Debt  to  bank,  note  for  collection 

is  not 

Decisions  as  to  collection  responsi- 
bilities  

Declaring  dividends,  reserve  neces- 
sary  

Default  of  bank  in  Clearing-House 

settlement 358 

Defaulter,  conduct  of 28 

not  to  be  given  charge  of  funds.       4 
Defalcations  and  poor  management  300 

in  Suffolk  Bank 385 

resulting  in  improved  methods.  301 

Delivery  of  bills  of  lading 92 

of  collateral  or  coupons 149 

of  notices ''^ 

of  pass-books ^1 

Demand  loans  of  different  kindsl35,137 

notes  with  collateral 134 

notes  without  mention  of  interest  400 

Departments,  clerks  want  knowl- 
edge of  various  departments. . 
responsibility  to  each  other 

Depositing  early  in  the  day 

Deposit  of  valuables 

tickets,  entries  from 48 

tickets,  value  of ^8 

Depositor's  account,  exposure  of. .  399 

pass-books ^^ 

rates  for  discounts 133 

457 


5 

278 
431 
396 


Depositors'  accounts 

how  to  average  an  account 459 

principles  for  properly  keeping.  458 

Depositors,  at  distance,  not  to  have 

passbooks ^" 


INDEX. 


507 


Depositors,  list  of 157 

security  for 43 1 

Destruction  of  redeemed  bills 202 

Detecting  counterfeit  bills 44 

Detectives,  the  Teller  in  that  ca- 
pacity      25 

Dilatory  habit  fatal  to  success 7 

Directors,  at  clerks'  desks 24 

compensation  to. . .   272,445 

may  prohibit  certification 15 

of    Savings  banks 442 

ownership  of  stock  by 438 

relations  to  officers 269 

their  election  and  organization.  264 

their  selection 118,270 

to  be  of  varied  businesses 118 

Disadvantages  of  clerkship  in  large 

banks 5 

Disappearance  and  loss  of  gold. . .     29 
Disclaimers  of  collection  responsi- 
bility      98 

on  telegraph  blanks 215 

Disclosing  condition  of  depositor's 

account 399 

Discount  clerk  and  the  loan 118 

clerk  and  tellers 125 

paper  from  brokers,  119, 136, 137, 416 

records 120 

time 132 

Discounting  for  shareholders 411 

to  get  circulation  out 198 

when  reserve  is  deficient 145 

Dividends,  care  of  dividend  list. . .   177 

payment  of 176 

reserve  to  be  up  when  dividends 

declared 177 

Division  of  labor  for  safety 280 

Doctor  for  the  bank 277 

Domestic  exchange  transactions..  224 

Dollars,  what  are  they 260 

Drafts,  chapter  on 262 

for  collection  from  strangers. . .     99 

grace  on 80 

novel  forms  of 83 

presentation  of 80 

protesting 263 

with  bills  of  lading 84,91 

Drawees,  their  duties 81 

Drawer  for  holding  paid  checks. .     63 
Duplicate  checks,  issue  of 241 


Duties  and  inter-relation  of  officers  303 


Early  closing  Saturdays 291 

rising  advised 295 

Economising  time 282 

Education  of  bank  officers 6 

Election  of  Directors 264,373 

Endorse,   proper  spelling  of    the 

word 415 

Endorsers  and    endorsements    on 
checks. .  .16.22,237,245,253,371,401 
signature,  bank's  knowledge  of.     27 
Endorsement  by  bank  President. .  274 

by  Treasurer  or  company 247 

forged  endorsement  on  checks. . 

100,  401 

furnished  when  absent 251 

guarantee  of 248 

of  check  collector  desirable 14 

of  check  wrongly  filled  out 245 

of  checks,  English  customs 371 

of  drafts  by  Cashier 88 

of  paper  by  clerks 143 

of  paper  for  acceptance  and  re- 
turn     97 

qualified  endorsement  on  check.  253 

stamps 102,246 

England,  (see  Bank  of) 

English  action  aa  to  marriage  of 

clerks 288 

banking  profits 374,406 

bank  reports,  publication  of.  .70,374 

banks  do  not  certify 372 

coins  and  bank-note  circulation .  365 
co-operative  plan  of  Fidelity  In- 
surance  377 

crossed  cheques 368 

custom  of  paying  directors 272 

depositor's  passbook 56 

Fidelity  Insurance  Companies. .  376 

hours  of  business 293 

Institutes  and  Associations..  .326,376 
law  as  to  certain  acceptances. ...     85 

methods  of  starting  a  bank 373 

oaths  of  secrecy 319 

plan  of  life  insurance  for  clerks  376 
practice  as  to  cheques  and  pay- 
ments  870 

public  reference  libraries 335 


508 


IXDEX. 


English  safe  deposit  customs 397 

stockholders'  meeting 378 

strong  rooms  and  vaults 34o 

Envelopes,  special  form  of 20G 

their  origin 200 

Entries  on  pass-books  by  Teller  only    50 

Equity  and  common  law 441 

Erasing  an  acceptance 87 

Errors  in  drawing  checks 239 

will  occur 277,278,333 

Estimate  of  men  from  ability,  not 

position 3 

Europe,  coin  shipments  to 32,34 

Examination  of  a  bank 446 

Examination  of  all  entries  and  work  278 
of  bank's  books  by  stockholder.  399 

of  bank  by  its  manager 446 

of  bank  reports  at  AVashington.  299 

of  discount  work 120 

of  officers'  bonds 333 

Examiner  and  examinations 297 

Examiners'  reports 451 

report  on  Book-keeper 451 

"      "  First  Teller 451 

"      "  Second  Teller 452 

"       "  Third  Teller 452 

Exchange  charges  on  collections. .  101 
domestic  exchange  transactions.  224 

its  relation  to  value  of  gold 38 

sterling  exchange  transactions. .  223 

Exchanging  collaterals 148 

Expenses,  bank  clerks'  necessary. .   286 

ordinary  and  incidental 282 

Expert  testimony  on  signatures. . .  244 
Express  company  as  collection  agt  101 
companies'  connection  with  Suf- 
folk Bank 393 

companies' protest  instructions.  114 
package,  under-valuation  of . . . .  159 
Extending  time  for  return  of  Clear- 

ing-House  item 359 

Extension  of  charter  of  National 

bank 433 

Extension  of  charter  and  officers' 

bonds 337 

Extra  help  in  vacation  time 288 

Extemporized  trusts 191 


Facts  and  figures 443 


Fiiiled  banks,  collection  made  bj'    97 

Faithfulness  urged 9 

Facsimile  of  report  blank  sent  to 

National  banks  (in  appendix.) 
Family,  value  of,  to  bank  officers..     10 
Fidelity  Companies'  methods.  .334,336 
companies, English  banks'  use  of 

376,445 

insurance,  a  co-operative  plan. .   377 
Fifteen  per  cent,  banks  in  reserve 

cities 494 

Figures    as  to  banks    and    stock- 
holders   444 

Finding  money  outside  of  counter  23 
Filing  time  paper  in  portfolios. . . .   127 

Finance  committees 267 

Foreign  paper,  when  to  forward. .  133 
Forged  endorsement  on  collected 

check 100 

Forgery  prevented 600 

Forging  a  signature  ignorantly. . .  438 
Forgetting  points  once  decided. . .  279 
Form  of  blank  report  sent  to  Nat. 

banks 473 

Form  of  special  examiners'  reports 

451,  452 

Forwarding  maturing  paper 133 

Fraudulent  business  paper 141 

Furnishings  of  banking  room 340 


General  balance  sheet,  when  made 

up 61 

daily  use  of 61 

form  of 62 

Gifts  of  money  by  bank 395 

Gold  and  silver 

disappearance  and  loss  of 29 

quantity  of 28 

relative  value  of 30 

Gold,  increased  production  of . . . .     29 

Gold  coin,  how  handled 31,33 

packing  and  shipment 33,34 

premium  on 38 

space  required  for 29 

standard  weights  of 35 

sweating,  clipping,  etc 32 

test  for  counterfeits 35 

Good  nature,  its  importance 10 

Grace  and  interest 91 

on  bank  checks 235,380 


INDEX. 


509 


Grace    on    coupon    and    interest 

warrants l''J4 

Grammatical  use  of  word  "bank"  415 
Guarantee      companies,     English 

banks'  use  of 37i),  445 

companies'  methods 334,  336 

Ejiven  when  not  needed 275 

of  endorsement 248 

Habits  of    officers    followed     by- 
clerks 8 

Half- holiday  Saturdays 291 

Handling  gold  coin  properly 32 

Handling  stopped  checks 465 

notice  to  Paying-Teller 467 

Handwriting,  study  and  practice  in  309 
Healthfulness  of  bank  position...       1 
Heredity,  to  be  considered  in  select- 
ing clerks 4 

Hobbies  for  leisure  hours 2,  317 

Holidays  and  maturing  paper. . . .   405 

and  receiving  the  mail 406 

opening  the  bank  on 404 

Homes  of  bank  officers 314 

Honesty  and  heredity 4 

Hours  of  business 7,  290 

of  business  abroad 292,  445 

of  business,  the  legal  view 292 

How  to  compute  a  bank's  reserve.  477 

How  to  become  a  reserve  city 470 

How  to  keep  depositors'  accounts.  457 
Husband's    consent    to    drawing 

balance 372 

consent  to  stock  transfer 195 

Identification  and  identifiers 17 

English  methods  in 18,  232,  371 

manufactured  and  fraudulent. . .     19 
of  holder  of  Letter  of  Credit.  .230,  427 

of  stockholder 184 

pass-word  for 427 

Identifier,  record  of 19 

responsibility  taken  by 20 

Improvement    in    form    of    pass- 
books       53 

Improved  methods  from  losses  and 

defalcations 300 

In  exchange,  and  "with  exchange"    90 

Index    book    for   depositors'    ac- 
counts      59 


Index  book  of  collection  contracts  105 
Information    supplied    (advertise- 
ment)  325 

Ink  responsibility 401 

Inside  workings  of  a  bank 446 

Inspector  of  branch  banks 445 

Institutes,  Bankers'  Institutes. 325,  376 

Instructions  as  to  protesting 112 

with  collections 72 

Insurance    by    bank    for    clerks' 

benefit 376 

Investments  of  bank  clerks 314 

Integrity  expected  in  young  clerks      4 

Interest,  accrues  when 400 

accurate 127 

at  different  rates 130 

on  demand  loans 137 

rules  for  calculating 128 

steady  accumulation  of 426 

tables 131 

upon  depositors'  balances, 

133,  380,  406 

upon  grace 91 

versus  principal 422 

warrants,  question  of  grace 154 

Inquiries  as  to  standing  of  firm. . .  411 
Irrevocable  powers  of  attorney. . .  432 


Joint  note,  how  protested 115 

Journal  entries  vs.  charge  tickets. .  459 
entries  directly  from  the  mail. . .  459 
entries  from  checks  and  deposit 

tickets 459 

entries         unrepresented         by 

vouchers 459 

how  to  use  charge  tickets 461 

miscellaneous  entries 461 

Journal,  form  of 60 


Keeping  cancelled  vouchers 347 

Keys  of  vault,  care  of 345 

i    Knowledge  and  information  sup- 
plied  325 


"Large   bank  not  best  for  young 

clerk 5 

261 


I    Lawful  money,  table  of. 


510 


INDEX. 


Ledgers— best  method  of  opening.  461 

form  of  ruling  bank  ledger 462 

bow  to  determine  number  pages 

to  each  account  (with  diagram)  463 
transferring  accts  to  new  ledger. .  465 

Legal  and  illegal  holidays 404 

Legislation  on  checks  of  deceased 

drawer 23 

as  to  lost  checks 254 

Leisure  time  in  the  bank 807 

hours,  uses  of 317 

Letter  of  credit,  issue  and  use  of. .  226 
Letters,  opening  and  handling.211,  278 

registering  valuable  letters 212 

return  request  on 243 

(see  Correspondence) 

Libraries  in  banks,  growth  of 6 

for  reference  by  students 325 

what  should  be  included  in. .  175 
License  issued  to  foreign  executor  188 
Life  insurance  furnished  by  bank..  376 

List  of  depositors I'^'S 

Listing  checks  in  large  daily  letter  210 

Living  in  the  bank  building 31 4 

Loan,  in  public  statement 68 

on  real  estate ^45 

on  shareholdeis'  stock 411 

ten  per  cent,  limitation  of 145 

with  reference  to  crops  and  trade  143 
Loaning  between  banks  at  clearing  355 

to  put  out  circulation 198 

Local  organizations  recommended 

for  clerks 6 

Location  of  banking  rooms 339 

Locks,  their  condition  and  care. . .  343 

Long  and  short  time  paper 143 

firm,  what  it  is 423 

Loss  from  abrasion  of  coin 32 

of  Letter  of  Credit 231 

of  paper  in  the  mails 98 

Losses    but    slight    in    legitimate 

banking 425 

Lost     and    found     property,     its 

ownership 23,  151 

checks  and  their  duplicates 241 

letters  to  be  looked  up  promptly  208 

package  of  money 393 

paper,  and  protest  of 114 

stock  certificates 192 

Lunch  room  for  the  bank 294 


Mail  and  telegraph 204 

delay  in  receiving 362 

loss  of  paper  in 98 

receiving  mail  on  illegal  holiday  406 

Mailing  certificates  of  stock 183 

dividend  checks 177 

the  daily  letters 210 

Management,  some  words  on 275 

Manager's  examination  of  his  bank  446 

use  of  daily  balance  sheet 61 

Mark,  in  place  of  a  signature.. 371,  408 
Marking  paper  to  show  ownership  127 

Marksman,  an  English  term 371 

Marriage  of  bank  clerks 287 

of  stockholders 194 

Married  woman  s  bank  account. . .  372 

Maturing  paper,  record  of 123 

Medical  care  for  the  clerks 378 

Meetings  of  the  Directors 267 

Messenger  and  his  duties 79 

as  a  machine 89 

Metropolitan  Bank,  N.  Y.,  its  re- 
demption business 390 

Military  rank,  illustrating  grades 

in  banks 2 

Minute  money,  one  kind  of 135 

Misdirected  letters,   why  not    re- 
turned    243 

Misunderstandings  prevented    by 

records 121 

Model,  a  bank  that  was  not 302 

Modern  conveniences  in  banking..  281 

ideas  and  methods 283 

Money  articles  in  newspapers.. 424,  439 

sent  by  telegraph 218,  222 

Monthly  balancing  of  pass-books . .     50 

memorandum  for  Cashier 172 

Moods  of  business  men 276 

Morning  hours,  use  of 327 

Mutilated  paper  money 39 

paper  money,  how  redeemed.. 4 1,199 


National  banks  must  receive  Nat. 

bank  notes 37 

National  banks— reserve  of 469 

text  of  law  requiring 469 

Neat  and  good  forms  for  books. . .  64 
New  clerks,  old  and  new  methods 

of  obtaining 4 


INDEX. 


511 


Newspaper  quotations  for  money. 

424, 439 

New  York  banks,  question  as  to 

reserve 418 

funds  bought  and  sold  at  clearing  357 

Notarial  fees  and  responsibilities. .  Ill 

Notary  and  protests 109 

(see  Protesting) 

Note  broker,  his  responsibility... .  137 

for  collateral  loan 134 

paid  by  mistake i;3 

payable  at  a  bank 94,  261 

payable  "in  exchange" 90 

Notes,  chapter  on 250 

errors  in  form  of 258 

negotiability  of 259 

protesting 259 

when  payable 256 

where  payable 26 1 

with  many  names 143 

coll'n  of,  is  not  recg  payment 

of  debts 17 

(see  Circulating  notes) 

Notices  of  loss  of  valuable  papers.  114 
of  maturing  paper  sent  by  de- 
positor   445 

to  makers  not  obligatory 27 

used  in  collection  department. .     76 

Notifying  bank  of  unexpected  ab- 
sence         9 


Oath  of  Directors 205 

of  secrecy  and  faithfulness.. 316,  336 
Objections  to  bank  clerkship..  1,  2,  320 

Ocean  shipments  of  coin 32,34 

Office  and  vaults,  care  of 169 

Officers,  every  one  a  subordinate. .       3 

Old  books,  their  preservation 846 

scores  settled 441 

Old-time  collection  methods 100 

One-man  bank  not  a  model 119 

Opening  new  ledger 461 

Opening  the  mail  as  received 211 

Organizations,  local  O.  of  clerks. .  6 
Out-of  bank  interests  and  pleasures  326 
Out-of-door  life  recommended. .  .2,  323 
Out-of-town  depositor  not  to  liave 

passbook 50 

Over-drafts  under   Suffolk    Bank 

system 387 


Over-issue  of  National  bank  notes  200 
Over-payment  of  check,  anecdote.  27 
Over-work  of  officers  and  the  bad 

results 284 

"Overs"  account — form  of 452 

Ownership  of  articles  found. . .  .23,  151 

of  U.  S.  National  banks 444 

stamped  on  paper 127 


Packing  coin  for  shipment 34 

Panic,  conduct  in,  anecdote 430 

usual  course  of 436 

Paper,  accommodation  paper 140 

business  paper  now  and  formerly  1 38 

buying  and  selling 135,  137,  416 

on  long  and  short  time 143 

with  many  names 142 

Paralysis,  pen 311 

Pass-books,    acknowledgment    of 

correctness 52 

balancing  and  delivery  of 51 

entries  and  care  of 50 

English  form  of 56 

improvements  in  form 53 

wrong  entries  in 53 

Pass-word  for  identification 427 

Paying  back  money 92 

check  to  wrong  man 25 

check  without  receiving  advice.  241 

cut  or  cancelled  check 255 

dividends 176 

money  on  telegraphic  order. . . .  219 

part  of  a  check 14 

unendorsed  check 407 

Paying-Teller 

duties  and  qualifications  of 12 

form  of  book  for 13 

his  promotion  rank 119 

to  have  new  money  on  hand ....  40 

Pay-rolls,  difficulties  in  supplying.  17 

Pen  paralysis 311 

Pencil  signatures iOH 

Penmanship,  study  and  practice  in  309 

Pensions  for  retired  clerks. . .  .378,  395 
Petition  for  redemption   of  worn 

coin 36 

of  bank  officers  in  1807 29:? 

Plain  writing  prevents  forgery  . . .  500 

Pleasure  in  business 321 


513 


INDEX. 


Portfolios  for  filing  notes 137 

Postal  cards,   advantages  of  and 

objections  to 206,  210 

Potatoes  with  a  draft 83 

Powers  of  Attorney 

file  of,  at  Clearing-IIouse 410 

for  stock  transfer 185,  433 

general  form  of  and  recording. .  403 

held  by  acceptor 87 

not  expressed  in  signature 408 

irrevocable  form,  and  why  it  is  so  433 
Premium  on  drafts   under  Letter 

of  Credit 232 

on  gold 38 

Presenting  drafts 80 

President  and  Directors 264,  273 

endorsements  by 274 

his  relations  with  Cashier 165 

modern  aids  for 273 

not  to  assume  all  responsibility.  119 

surety  bonds  for 3;i0 

who  lost  his  mind 123 

Printing  in  the  bank's  books 57 

signatures  on  circulating  notes. .  165 

stationery  in  copying  ink 207 

Private  business  kept  apart  from 

bank  duties "^ 

Probate  of  will  annulled 187 

Production  of  gold 29 

Profit  of  English  banking 374,  406 

on  lost  circulation 199,  200 

Prominent  bankers  once  clerks —      1 

Promotion  declined 319 

not  for  every  deserving  clerk. . .       3 
Promotion  money,  an  English  cus- 
tom    372 

Promptness    in     getting    through 

work "^ 

ministerial,  anecdote  of 9 

Protested    bills    shown    in    bank 

reports 69 

Protesting  a  certificate  of  deposit. .  400 

by  person  not  a  Notary 109 

country  cliecks  charged  through 

clearing 361 

in  various  cases.  .113,114.259,263,292 
Publication  of  bank  statements.  .68,374 
Published  rates  for  money 424 


Qualified  acceptance  of  draft 85 


Qualified  endorsement  of  check. . .  25'? 

Queer  signatures 495 

Qualities  expected  in  clerks 4,  385 


Raised  checks 27,  403 

Rate  for  different  kinds  of  loans. .  135 

for  money  as  published 424 

of  discount  noted  on  record  ....  133 

of  discount  to  depositors 133 

of  interest  on  loans  at  Clearing. .  357 
Real  estate,  loans  upon,  and  owner- 
ship of 145 

Receipt  by  messenger  for  payments    88 

for  collaterals  delivered 148 

for  paid  checks  returned 348 

Receipting  for  payment  of  checks.     14 

Receiving-Teller,  his  entries 48 

his  qualifications  and  duties. ...     47 

Record  kept  by  the  Cashier 166 

of  amount  of  certain  paper 144 

of  collaterals  and  changes 149 

of  collection  con  tracts  and  experi- 
ences    105 

of  collection  paper 75 

of  drafts 73 

of  depositors'  accounts 59 

of  Directors'  meetings 267 

of  letters  received  and  sent 307 

of  maturing  paper 133 

of  notices  delivered 78 

Recording  Powers  of  Attorney 403 

Redemption,  Bank  of,  organized. .  3S9 
bureau    at    Washington    estab- 
lished  390 

of  fraudulently  issued  bills 201 

of  mutilated  bills 41,  199 

ofNationalbanknotes.37,38,199,303 

of  notes  stolen  unsigned 44 

of  U.  S.  Treasury  notes 37 

of  worn  coin,  petition  for 86 

under  Suffolk  Bank  system 384 

through  U.  B.  redemption  bureau  203 
Registered  bonds  and  their  transfer  155 

mail,  safety  of 183 ,  213 

mail,  the  system  of 212 

Regular  daily  work  an  advantage.  322 
Relations  and  duties  of  the  several 

officers 303 

Relative  value  of  gold  and  silver. .     30 


INDEX. 


513 


Repetition  of  telegrams 215 

Replies  from  drawees 80 

Reports  and  returns,  how  made  up    66 
as  published  by  foreign  banks. .     69 

examined  at  Washington 299 

of  circulation  in  Great  Britain. .  367 
of  condition  and  their  publica- 
tion  68,  374 

to  the  Clearing-House 362 

Reserve,    discounting   when   it  is 

not  up 145 

held  by  Trust  Company 380 

kept  in  neighbor  bank 419 

must  be  up  to  declare  dividend.   177 
small  reserve  sometimes  required  420 

of  bank  in  N.  Y.  City 418 

of  what  it  may  consist 417 

of  Trust  Companies  in  banks. . .  381 

Reserve  in  bank 473 

Reserve  outside  of  bank 472 

Reserve  of  National  banks 469 

what  is  lawful-money  reserve. . .  469 
Reserve  of   Nat.    banks  in    New 

York,  Chicago  and  St.  Louis  475 
Reserve — other  cities,  how  to  com- 
pute   477 

of  banks  outside  of  reserve  cities  486 

the  fifteen  per  cent,  rule 488 

the  two-sevenths  rule , 482 

Residence  in  bank  building 314 

Responsibility  for  carelessness  in 

check-drawing 403 

for  Clearing-House  transactions.  357 

for  safety  of  collaterals 150 

for  collections  and  agents 97 

for  notary Ill 

of  note  broker 137 

of  last  endorser  for  those  pre- 
ceding   401 

of  telegraph  company 215 

on  raised  checks 27,  403 

Restitution  after  many  years 441 

Retirement  from  business  not  al- 
ways wise 328 

of  aged  bank  officers 440 

Return  of  misdirected  letters 243 

Returns,  (see  Reports.) 
Returning     cancelled    checks    to 

drawers 348,  372 

checks  charged  through   Clear- 
insr 358,  371 


Returning  unpaid  collections 103 

Rooms,  care  of 341 

location  and  furnishing 339 

Routine  ways  of  work 320 

Rules  for  calculating  interest. .  127,  128 

for    redemption    of    mutilated 

bills 41,199 

Rust  in  clerks 320 


Safe  Deposit  Vaults  abroad 397 

Safety  of  legitimate  banking 425 

Safe-guards  against  alterations  of 
checks 238 

against  large  issues  of  paper 144 

against  theft  of  paper 127 

Salaries  of  officers 285 

Sale  of  collateral  to  unpaid  notes..  135 

Saturday  early  closing 291 

Savings  bank  management 4i2 

bank  statements 71 

by  bank  clerks 315 

Scotch  system   of   apprentices  in 

banks 5 

Scrap-book  for  Cashier 175 

Secrets  of  the  bank 3;5 

Selection  of  paper  by  its  maturity.  143 
Self-respect,  may  be  maintained. .       3 

Selling  bank  property 432 

old  books  and  papers 3-17 

Settlement  of  estates  of  stockholders  190 
Settlements  between  banks  in  gold, 

anecdote 32 

Shipping  coin  across  the  ocean.  .32,  34 
Short  cash,  the  Teller's  efforts  to 

find 26 

' '  Shorts  "  account — form  of 455 

Signature,  a  legal  signature 407 

by  mark 408 

expert  testimony  on 244 

file  of  local  signatures 409 

great  authority  of  Cashier's  sig- 
nature   165 

on  Letter  of  Credit 229 

on  petitions  or  recommendations  4i4 

peculiarities  in 310 

Signatures 495 

blind  signatures  and  plain  writ- 
ing  495 

how  some  bank    officers  write 
their  names 4C  5 


5U 


IXDEX. 


Silver  certificates 38 

counterfeit  coiu  test 3o 

for  shipment 34 

standard  weight  of  coins 35 

why  fallen  in  value 31 

Skeleton  ledger  described 58 

Slips  for  writing  up  depositors' 

checks 51 

Small  depositors'  accounts 396 

Societies  of  bank  clerks 325 

Special  deposits  of  valuables 396 

Speculation  by  bank  officers.  .300,  315 
Spelling  of  some  banking  terms. . .  415 
Stagnation,  a  tendency  towards. . .  319 
Stamps    for    collection    endorse- 
ments   102 

Stamped  endorsements 245 

State  banks  defined 413 

Statements  of  discounts  and  loans.  124 

of  condition  published 68,  374 

Stationery  should  be  first-class. . .  205 
Statistics  as  to  ownership  in  Na- 
tional banks 444 

Sterling  exchange  transactions...  223 

Stimulants  for  bank  officers 294 

Stock  certificates  by  mail 183 

certificates  and  transfers 179 

in  name  of  dead  persons 190 

of  National  banks,  how  held.. .  444 

record  of  issue  and  retirement. .  181 

Stockholder,  what  constitutes  a. . .  438 

Stockholders  changing  names 194 

meetings 264,  373 

right  to  examine  bank's  books. . .   3^9 

Stolen  bonds,  their  ownership 157 

Stopped  checks 465 

how  to  handle 465 

form  when  duplicate  is  issued. .  466 
importance  of  notice  to  paying 

teller 467 

money,  whose  loss 24 

Stopped  notes  of  Bank  of  England 

157, 366 
Stopping  payment  of  bonds  and 

coupons 156 

of  checks 254 

of  Letter  of  Credit 231 

redemption  at  Suffolk  Bank...  387 

Strangers,  danger  in  dealing  with.  277 

Strong  rooms  of  English  lanks. . .  397 

staff  needed  and  why 1 


Study,  habit  of  study  valuable... .  325 

Studies  for  leisure  hours 316 

Subordinate  positions  held  by  able 

men 3 

Success  as  bank  officer,  qualities 

needed 4 

Suffolk    Bank     and      counterfeit 

notes 45,  387 

clerks  as  counterfeit  detectors. 44,  386 

notice  of  ceasing  to  redeem 387 

redemption  system  of 384 

returning  bills  by  messenger 

385,  388,  392 

well-kaown  men  of 390 

Sunday  work 301 

Supplying  an  absent  endorsement.  251 
Supply  of  right  men  for  banks. ...       3 

Sweating  gold  coins 32 

System  at  the  Manager's  desk. . . .  429 

Tax  on  circulation 66 

Telegrams  in  cipher 218 

may  be  sent  by  anybody 220 

received  after  bank  hours '.  215 

received  unpaid 216 

repetition  of 215 

Telegraph  Co.  s  responsibility 215 

use  of  the 213,281 

Tellers'  differences 452 

form  of  "overs"  acct 452 

form  of  "shorts"  acct 455 

number  of  errors 457 

total  differences 457 

Teller  as  a  detective 25 

who  was  short 26 

Ten  per  cent,  limitation  of  loans. .  145 

Theft  of  money  from  counter 24 

Theological  views  not  of  first  im- 
portance         4 

Three  cents,  an  error  of 28 

Tickets  for  use  between  clerks 125 

Time,  calculating  time  on  paper. .  131 

certificates  of  deposit 398 

economy  of 282 

of  day  when  note  due 93 

out  of  bank 7 

paper  as  collateral 149 

Transfer  of  registered  bonds 155 

of  the  stock 184 


INDEX. 


515 


Treasurer,  proper  endorsement  by  247 

Treasury  agents  for  banks 285 

notes,  iiow  printed 42 

rules  for  redemption  of  mutilated 
notes 41,  199 

Trust  companies,  chapter  on 379 

company,  by-laws  and  rules 381 

Trustees'  accounts  properly  named  183 

transfers  of  trustees'  stock 186 

without  authority 191 

Ultra  vires 483 

Undervaluation  of  express  parcels.  159 

U.  S.  care  of  old  vouchers 349 

treatment  of  worn  coin 32,  35 

Union  of  banks  for  collection  busi- 
ness  106 

Unpaid  collections,  letter  for 103 

notes,  selling  the  collateral 135 

paper,  what  to  do  with 94 

telegrams,  how  to  deal  with. . . .  216 
Unsigned  stolen  Nat'l  bank  notes.     44 

Unusual  collection  items 105 

Usury  and  its  penalty 416 

Vacation,  advantages  of 288,  328 

application  for 269 

arranging  work  for 288 


Vacation — special  annual  vacation  290 

sending  word  if  detained 9 

Vade  mecum,  the  Cashier's 171 

Value  of  National  bank  notes 37,  38 

Vaults  for  customers'  use 397 

in  custody  of  Cashier 169 

Vouchers  for  absent  paper 133 

keeping  orreturningold vouchers  348 

Waiving  demand  and  notice 187 

Wallet,  use  of  by  messenger 88 

Waste  of  materials  and  time 9 

paper,  care  of 342 

Watchmen  for  rooms  and  vaults. .  345 
Webster,  Daniel,  anecdote  of.  ..82,  429 

Weighing  gold  coin 31 

Well-informed  clerks  of  great  value      6 

What  ' '  reserve  in  bank"  is 472 

What  "  reserve  outside  of  bank"  is  472 

Will,  probate  of  will  annulled 187 

Women  employees 421 

of  business 420,  437 

Work,  pleasure  in  regular  work  . .  322 
Worse  than  a  defaulter,  anecdote. .  428 
Writer's  cramp 312 

Yearly  and  monthly  duties 173 

Young  men  starting  in  banks 5 


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